CML wants tax breaks for retirement advice
The Council of Mortgage Lenders has called on government to consider introducing tax relief on professional advice received at retirement, to encourage take-up.
This was one of several calls to action for regulators, government and the mortgage industry to improve the market for older consumers.
The CML’s report shows how complex and interconnected the issues are when lending into retirement, with an overarching message that improving this market in a meaningful way requires significant collaboration both inside and outside the mortgage industry.
Those involved range from mainstream lenders and lifetime mortgage firms, to pension providers, financial advisers, compliance experts, groups representing older customers, retirement housing providers, think tanks, other trade bodies and regulators.
This report follows the publication last month of externally-commissioned research on the demand for retirement borrowing.
Also in November, the Building Societies Association committed to review maximum age limits on mortgages, as one way to better support those needing loan finance into and in retirement.
The CML asked HM Treasury to ensure that the Financial Advice Market Review is mindful of the need for joined-up, multi-disciplinary advice for older consumers and also encouraged Pension Wise to include substantial questioning around housing debt.
In terms of work with brokers, the CML stated that it will work with its members to identify how to improve ‘hand-off’ arrangements between different advisers when this would best serve the customer’s individual needs.
The report called upon lenders to work with the intermediary sector towards a more seamless advice framework for borrowing into retirement and also suggested looking into the potential for a market made up of the 50 to 75-years-old age group for a product that can flex between capital repayment and interest-only rollup over time, along with further product innovation for the 65 to 74-years-old age group.
The CML will also monitor emerging evidence about how pension freedoms are interacting with the mortgage market - including whether access to pension pots is feeding through to some customers repaying their interest-only mortgages, for example.
The report asked the Financial Conduct Authority to consider addressing how regulation could encourage a more holistic approach to mortgage, lifetime and investment advice, as well as working on a standard definition of retirement.
It also urged the regulator to looks at how different reasons for borrowing should be reflected in sales channels, noting that health may sometimes be even more important than age in determining the quality and suitability of products and the sales advice that accompanies them.
Additionally, the FCA should change some of the Mortgage Conduct of Business rules to allow a lifetime mortgage to be an acceptable repayment strategy for interest-only mortgages, according to the CML.
The council’s director general Paul Smee admitted there is no silver bullet to address the complex issues involved in the housing and financial needs of older borrowers, but said it is “hugely significant” that so many willing participants from across the mortgage industry and beyond are now collaborating.
“We should push forward on the more straightforward issues - such as improving advice hand-offs, using the Pension Wise trigger point to address housing and debt issues, focusing on good product design, and a regulatory focus on avoiding negative unintended consequences on retirement borrowing.
“A truly holistic approach will take longer to emerge,” he continued, adding that there is enthusiasm to work together to address the issues.
peter.walker@ft.com
