The Actuarial Profession has warned while the equity release market should be the last major financial transaction anybody enters, an increasing number of providers have entered the market over the past few years and will continue to do so as the development barriers are eroded away.
According to its Equity Release Report, new barriers recently added include financial advice requirements on equity release which are different from the main product lines of many mortgage providers, adding to a high risk factor in what is historically a relatively small-sized market.
As the market grows, however, many of these obstacles will be overcome, the report predicts.
The Actuarial Profession found there to be a major gap between current and planned pension provision, and consumers’ needs.
As was highlighted in the Pension Report in October last year, people will be faced with working longer to ensure a decent retirement, although with the total housing wealth of people aged 65 and over now standing at about £1.1trn, equity release mechanisms will have a major role to play in funding many peoples’ retirements.
As a result, the report suggests seven key steps which consumers should consider when seeking advice from an equity release advice and before signing up to an equity release scheme, including:
Ged Hosty, chairman of the working party of the Actuarial Profession says: “Taking out a suitable equity release scheme can make immediate and significant improvements to one’s overall quality of life.
He believes the equity release market could mushroom to many times its current level and therefore encourages Government and the FSA to regulate reversion schemes as well as require providers to illustrate potential payments beyond average life expectancy and ensure providers have sufficient reserves to cover their financial exposure to increased longevity.IFAonline
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