Following the radical overhaul of the pensions system in March this year, the Council of Mortgage Lenders has been “pressing” for a regulatory review of the rules surrounding lending into retirement.
Paul Smee, director general of the CML, said this process had been ongoing since the radical overhaul of the pensions system was announced in the Budget this year.
“It is something we have been talking about ever since the proposals came out in April. A lot of things have been changing as a consequence of this move by the government.”
Speaking to FTAdviser, Mr Smee said that because some of the impact the pensions reforms on the lending into retirement space, there was a need for a newer set of rules that would accommodate these changes.
He said: “There is one major area where the industry attention should be focussed, that is lending into retirement and the way in which the whole market will be affected by the changes to annuities and the pension rules next April.
“There is an interface between those changes [the pension reforms], the way in which people borrow into retirement, and the way in which people use equity in their house and all sorts of angles.
“That I think is a really important issue to be addressed, particularly given that the regulator at the moment is not exactly enthused by lending into retirement.
“I think the whole picture is now changing and we will be pressing for a review of how the lending into retirement rules bite, so they are very fit for purpose in a new world of pension liberalisation.”
Mr Smee said he expected there to be a new set of challenges and product opportunities for the lending into retirement market. “We also need to ensure it is properly regulated, because at the moment the default position is [that] lending into retirement is not a good thing.
“I am not saying it is a good thing going forwards. I am saying it is a different thing. We are in a different place in the future after pensions liberalisation.”
Mr Smee also explained how important it is that the regulator acknowledges the affect the pensions changes will have on the mortgage market, emphasising that regulation should not be segregated into separate silos, but that the approach needs to be an integrated one.
He said: “If you look at regulation it is quite often done on a silo basis... there is a pensions silo and a mortgage silo and there are various other bits of silo, and actually I think breaking down those silos is going to be very important at a time when pension pots become more flexible.
“The regulation should be there to take into account the changed circumstances of a liberalised pension market so that is the reason they [the regulator] need to review how they view the retirement market.
“We have been drawing attention to the need to do this sort of review since it came out. The regulators are aware that the circumstances are changing, we have just got to make sure we will continue to make sure that they [equity release schemes] are fit for purpose.”
