James Coney  

Enabling the redistribution of wealth

James Coney

James Coney

Another week, another meeting with an insurer who – on the quiet – tells me that they are considering breaking into retirement lending.

They better hurry up, or they will miss the boat.

Or should I say gravy train.

Equity release is on the front line of life insurers’ business models these days – and it is no surprise with the property wealth of the over-65s estimated at £1.1tn.

The only thing that I am stunned about is how long it has taken them to twig that, when it comes to the roof over our heads, we Brits are suckers.

At the Sunday Times we have a column called Fame & Fortune, where a celebrity talks about their finances. There is a question in it about whether they think property or pension is better – invariably they say property; invariably I tut.

Last week we had Baroness Karren Brady admit as much. Even Andy Haldane, the chief economist at the Bank of England, said he thought pensions were too complicated and that property was better because of rising prices.

Daft as you may find them, there is never going to be an escape from these attitudes. So it is better to embrace them.

After all, equity release could be the answer to that great generational split in property ownership between the millennials and the baby boomers. What better way is there to redistribute housing equity than to hand over large chunks of it to allow the next generation onto the ladder?

And it looks like many are doing this, with 26 per cent gifting some of the average £74,000 they drew from their homes, according to Key. However, it is hard to escape the fact that almost two in three used the cash for home and garden improvements.

Though equity release has been staging a successful redemption since the days of ghastly reversion plans, it only feels to me like it is having a moment now.

And it has got to form the heart of any sensible financial planning when it comes to retirement, not least because the products and the pricing are so much sharper. The boom in interest-payment plans also takes the whiff of nastiness away from them.

But then the challenge has never really been the products, it is the people – and that is what made advising on it so difficult. How do you persuade elderly customers, some of whom are extremely private with their affairs, that they need to be open and honest with their family?

Equity release is a pragmatic response to the staggering gains in the property market, and it is also a weapon to use against the continued raid on pensions, and a sensible tool against inheritance taxes.