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.
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.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.
What is needed though is rigour and transparency. Equity release means negotiating a minefield of personal issues, and is best left to an independent adviser. Making sure that payments and commissions, including procuration fees and retained fees, are out in the open just ensures that this very tricky product keeps building in greater respectability.
RPI versus CPI
One of my great annual annoyances was prompted this week when a letter from Legal & General dropped through the letterbox for my life insurance policy.
Its pricing statement always hikes my price as it is linked to the retail price index, rather than linked to the government’s preferred consumer price index.
Why? I suspect the answer is that it is because it invariably runs about 1 percentage point above CPI. It really is a dirty trick. There is no reason to link a policy to RPI other than it makes an insurer more money. It is an outdated and ill-equipped measurement of rising prices.
That is not just my view, it is that of the head of the Office for National Statistics.
What also grates is that every year it simply takes the increased premium through a new standing order – which means that I now have several leaving on the same day. That, if anything, serves as a timely reminder that I should look for a new policy.
Why investors have come to love Mr Smith
It looks like Terry Smith has done it again. His new Smithson investment trust, which focuses on small and mid-cap firms, has more than doubled its funding target. Investors love Mr Smith; I love him. Fundsmith has returned 158 per cent in five years, thank you very much.
Buying good companies, not overpaying and holding them for yonks – it is not exactly rocket science. He has even got straightforward charges.
Oh, and he does it all while living in Mauritius.
Other fund managers must be sick to the back teeth of Mr Smith.
James Coney is money editor of the Sunday Times
