Iniquity release?

Michael Trudeau

As a journalist I have learned to trust my instincts when something just doesn’t feel right. So what is it about equity release that makes the hair on the back of my neck stand up?

When I started at FTAdviser two years ago, it was my first experience with financial journalism. I was learning a lot during that time, and a lot of it was going straight over my head. However, I hadn’t been in my post more than a couple of months before I started getting calls and meeting requests from companies pushing their equity release businesses.

These folk went out of their way to convince me that equity release was wrongfully mistrusted due to historical troubles, and was springing back as a legitimate source of retirement income or to fund long-term care for homeowners who might otherwise struggle.

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They were - and still are - very eager to get equity release into the press.

Now, there are certainly those for whom equity release could be a suitable option. One adviser I spoke to said someone approaching, or at retirement, maybe without children or other funding for care or retirement income, might well benefit from such an arrangement.

The point about having no children is two-fold: on one hand it means the children won’t be able to support their parents’ dotage, but it also means if the client chooses to spring for equity release, they won’t be eroding their children’s inheritance.

Generally, the message I’m hearing from advisers is that equity release is a very niche product, that would be suitable for only a select few special cases.

But then you see news like this from the Equity Release Council, saying the sales of such products have hit their highest quarterly peak in five years, at an eye-watering total value of £284m.

This apparent contradiction forms the basis of my instinct on the matter, which is this: the intense level of promotion being given to equity release is not in line with the actual demand that exists for it in the market.

You might argue that high supply and low demand leads to competition, which can only be good for customers. Competition is a good thing, but it can also prompt companies to search for business in new, unexplored and perhaps inappropriate territories.

Take the worrying findings of Which? undercover research for example.

Now let’s turn to the ad Key Retirement Solutions ran in the Telegraph last month.

The - frankly shocking - ad pitched equity release like this: “Instead of jingle bells, many over-55s will be hearing alarm bells as they consider paying for this year’s presents with next year’s money... If you’re a homeowner aged over 55 and you can’t afford to finance this year’s festivities, there may be another way.”

It went on to say Key Retirement Solutions’ equity release service could help people enjoy Christmas and new year without worrying about credit card bills.