Perhaps the secret is not to use the words.
• “Equity release” – Is releasing funds, but a saying not liked
by the public.
• “Lifetime mortgages” – Are still here a little more accept-
able, but many clients dislike it as lifetime meaning it is long
and for the old.
At 55 with a life expectancy of 35-40 years, are the phras-
es ‘equity release’ and ‘lifetime’ difficult to swallow? They
just want a mortgage. But to get around the system they
fall into this category, rejected by the high street on the
grounds that they are:
• Too old
• Self-employed
• Income and expenditure issues
• Failed credit score
• Benefit claimants
These are just a few with many more excuses, but these are
perfect for equity release or lifetime, but call it a MORT-
GAGE with long term fixed rates.
New innovative lending has arrived, mortgages
with options under the Equity Release Council guarantees,
with rates starting as low as 4.94% monthly and with in-
creases in LTVs of up to 5% cannot be ignored. A 3rd lend-
er has introduced fixed rate ERCs so fully transparent.
It’s never been a better time to target your mortgage data-
base. You should be contacting your clients to offer what
could be the cheapest and highest LTVs available in their
lifetime. Remember the MORTGAGE can be used for pur-
chase as well as remortgaging, it may even be up-sizing
rather than down-sizing?
Product knowledge? Need to know more? Then why not
join us at one of our FREE breakfast workshops.
More info on next page.
Join us to improve your knowledge & your ability to identi-
fy opportunities, the new product ranges coming to market
that allow choice like we have never seen before, including
mortgages that do not have to be based on income!
RESULT!
Jane Hanlon, 0800 612 5423
LIFETIME MORTGAGEINSIGHT
Issue n. 3 | June 2015
B r o u g h t t o y o u b y T h e P r e m i e r E q u i t y R e l e a s e C l u b0 8 0 0 6 1 2 5 4 2 3
Is property the new pension?By Dave Morris, more2life
Page.3
Why property wealth should be considered by those wanting to clear an interest only mortgage
By Alice Watson, Retirement Advantage
Page. 4
Number of borrowers using equity release to clear interest only loans trebles*By Jane Hanlon, The Premier Equity Release Club
Last year News reported that clients would become mortgage prisoners, but in 12 months the providers have adapted… Have you?
7 year gilt rate at 08/06/15 = 2.44% *reported by Mortgage Strategy 1st June 2015
2 Lifetime Mortgage Insight - Issue 3 - June 2015
Breakfast workshops: “Get to know your lenders” - will create you more opportunities!Hosted by Jane Hanlon, The Premier Equity Release Club and Bob Boon, Ashfords LLP
Six months ago we didn’t have a non status mortgage!
Find out more join: Jane Hanlon from The Premier Equity
Release Club and Bob Boon (formerly Stonehaven) now at
Ashfords Solicitors, for a breakfast workshop on product
innovations, marketing and opportunities in this exciting
growing market, for mortgages for the over 55’.
Jane & Bob have announced the first two workshops start-
ing from 9.30am and finishing within two hours, including
issue of CPD certificates.
London - 7th July - Ashfords LLP, 1 New Fetter
Lane, EC4A 1AN
Exeter - 14th July - Ashfords LLP, Ashford House,
Grenadier Road, EX1 3LH (Easy access just off M5 junc-
tion 29 )
More dates and venues to follow after the summer break,
watch this space for more details.
The workshops, will cover:
• Meet the innovative and invited lenders
• Jane will cover all remaining lenders’ unique selling points
• Bob will cover marketing and identifying new opportuni-
ties
• A question and answer session to finish
• Support material to take away and CPD sent by email
after event.
After the event there will be the option to discuss any com-
pliance support requirements.
Jane & Bob would be delighted if you would like to join
them. Spaces are limited so booking essential.
Click here for more info & to book your place.
Book your place:
www.thepremierequityreleaseclub.co.uk/breakfast-workshops
3Brought to you by The Premier Equity Release Club. Contact our free helpdesk on 0800 612 5423.
Is property the new pension?By Dave Harris, Managing Director, more 2 life
The question over whether it’s better to invest in a pension or a property has long been a matter of much debate, and continues to plague the younger generation. But now it looks like the argument could take on a whole new dimension - this time becoming a tax and inheritance issue for our baby boomer generation.
When the Chancellor announced that
the 55% ‘death tax’ was going to be re-
moved from pensions, it was a change
that was welcomed by both advisers
and clients alike. Until then, the fact
that their pension fund would be
taxed at 55% when they die, or worse,
be lost altogether if they had bought
an annuity, was just another reason
why people were starting to turn to-
wards other ways of financing their
retirement.
The recent changes mean that if a
person dies before they are age 75,
the pension fund can be handed down
to their beneficiary tax free. The ben-
eficiary will then be able to draw an
income or take it all as one lump sum,
without paying any tax. If a person
dies after they are age 75, the benefi-
ciary will pay 45% tax (2015/16) on a
lump sum, or they will pay tax at their
marginal rate if they choose to take an
income from the fund.
Although the primary function of a
pension is to provide an income in re-
tirement, one of the repercussions of
this change is that people could end
up ring-fencing their pension for as
long as possible, or at least until they
are age 75. That way, if they die, the
entire fund will remain untouched by
the tax man.
That’s all very well, but what if they
need the money? Well, one source
of income could be their property.
With lifetime mortgage interest rates
reaching an all-time low, and continu-
ing to slide, the idea of releasing eq-
uity from their home could become
a serious contender for financing re-
tirement. After all, any cash they take
from their property is tax free, as op-
posed to the income taken from a pen-
sion which, apart from the first 25%, is
taxed at their marginal rate.
Taking out a lifetime mortgage is also
a way of reducing any potential future
IHT liability. And if clients feel uncom-
fortable with the idea of potentially
not leaving any of the value of their
property to their loved ones, they can
take out a guarantee which ensures
that a certain percentage of the value
of their property is left to their bene-
ficiaries when they die, no matter how
long they live and how much interest
they accrue.
Historically, the British have had a
slight obsession about leaving their
property to their loved ones. But per-
haps the table is starting to turn. It
wasn’t so long ago that as a nation we
baulked at the idea of debt unless it
was to buy a property, or maybe a car
at a push. That all
changed with the
advent of credit
cards and cheap
borrowing, as
well as
generational shifts in attitude towards
debt.
Much the same could be said for prop-
erty. People are living a lot longer in
retirement, and it seems unrealistic to
expect them to sit on what is likely to
be the single biggest asset they own.
People don’t necessarily want, nor
need, to downsize, so a lifetime mort-
gage gives them access to this much
needed money, which they can enjoy
tax free.
Research more 2 life recently carried
out into Retirement Lending seems
to bear this out – 44% of homeown-
ers aged 45 and above now consider
their property wealth as part of their
retirement planning including 28% of
those aged 65+. And a similar number
of those over 65 say they would pre-
fer to use their home equity to fund
retirement because of the favourable
tax treatment.
This shift in attitude, combined with
better value and more flexible prod-
ucts, will bring the lifetime mortgage
right into the centre of retirement
planning, perhaps dawning an era of
living on property, not pensions.
Contact more2lifeTel: 08454 150 150
Email: [email protected]
Visit: www.more2life.co.uk
4 Lifetime Mortgage Insight - Issue 3 - June 2015
Why property wealth should be considered by those wanting to clear an interest only mortgage
Research from the FCA sheds some light on the number of
homeowners who are likely to be affected by this over the
coming years. The overall message is worrying: 2.6 million
interest-only mortgages due for repayment by 2041. As
many as 48% of these homeowners face a shortfall at re-
payment day of an average around £71,000 and as many
as 260,000 have no repayment vehicle of any kind in place.
The recent arrival of the pension freedoms means
that people aged over 55 who have such a shortfall can
choose to use their pension pot to clear the debt, if they
so wish.
However, while the increased flexibility of the pension
changes has been welcomed, the need for retirement plan-
ning has never been so important. Many consumers are
unaware of the tax implications a withdrawal from their
pension pot could have, and rather frighteningly, many ar-
en’t aware that if you take cash from your pot and fail to
inform all other pension firms holding your retirement sav-
ings within 31 days you could face a fine.
With so many changes, it’s important that people ap-
proaching retirement seek advice from a financial adviser
and understand the best option available for their circum-
stance. In turn, financial advisers must ensure that when
they’re giving advice on retirement planning they’re taking
a holistic approach. This means looking at all of their client’s
assets, and considering the property alongside any pension
pots and investments.
Releasing property wealth through a lifetime mort-
gage could be a more sensible solution for clearing resid-
ual debt when compared to releasing cash from a pension
pot. Where a withdrawal from a pension which is above the
25% tax-free allowance carries significant tax implications,
a lifetime mortgage is a tax-free way of raising a cash lump
sum.
Recent developments in the lifetime mortgage market
also mean that customers have a wider range of options to
choose from, allowing them to tailor a product to suit their
individual needs while continuing to be protected from the
product safeguards. This means that if they want to
service the interest on the mortgage, they can. Or, if they
want to pay down the mortgage, they can choose to make
capital and interest payments.
Where clients are raising money to clear their outstanding
mainstream mortgage, releasing the capital locked in their
homes through equity release offers a sensible alternative
to withdrawing a pension pot in one go.
Contact Retirement AdvantageTel: 0800 068 0212
Email: [email protected]
Visit: www.retirementadvantage.com
By Alice Watson, Product and Communications Manager, Retirement
Advantage (formerley Stonehaven)
For those approaching retirement, the biggest financial worry is often carrying residual mortgage debt into retirement.
5Brought to you by The Premier Equity Release Club. Contact our free helpdesk on 0800 612 5423.
Should the pension pot be used to clear an
interest only mortgage?By Faye Moutzouri, The Equity Release Council
Pension freedoms are enabling people to use their pots to
clear interest-only mortgages soon nearing their expiry
date. This solution may be suitable for many however it
needs attention so that this option doesn’t affect an indi-
vidual’s entitlement to benefits. This is an area that advis-
ers need to take into consideration when looking at clients’
financial options in order to inform them of the potential
repercussions.
At the same time, the newly introduced pension rules have helped, and will continue to help, towards the main-
streaming of equity release in financing later life. For some,
releasing equity may be a more efficient solution to clear
their existing mortgage than extracting their pension pots.
New pension rules can facilitate individuals to get more
from their pots in their early retirement stages and help
pay off an existing mortgage, while they could later use
their equity to supplement their income, and/or fund home
adaptations and future care costs.
Alternatively, people may take advantage of the new rules
to pass their pension pot on to their heirs tax-free; and turn
instead to equity release.
For that matter, holistic consideration of assets
and what they can offer in terms of returns is crucial in
planning for a long retirement. The pension pot, savings
and the house, should all form elements of peoples’ long
term financial planning based on their requirements, life
stage, and on the impact of each one of them on
inheritance, benefits and tax.
Times are changing and customer profiles do too especially
if we are to look at the Equity Release Council’s Market Report findings illustrating an increase in
the percentage of customers aged 55-64 (from 17% in
H1 2014 to 20% in H2 2014). Equity release is rapidly be-
coming mainstream not least as a result of the standards
and safeguards of the contemporary market. The concept
of equity release as a ‘last resort’ per se is gradually being
changed so that it forms a natural part of later life planning.
Demand for equity release will keep on increasing. The
industry needs to continue investing in its reputation
to help erase once and for all the scandals of previous de-
cades. Emphasis should also be placed on distribution. Ad-
visers should increase substantially in terms of numbers
but with caution to upholding standards and to ensuring
carefully managed processes to avoid misselling cases. Ad-
ditionally, more high street names in the sector along with
product innovation will help the further development of
the market.
Contact The Equity Release CouncilTel: 07557 856 705
Email: [email protected]
Visit: www.equityreleasecouncil.com
Image: Howard William
6 Lifetime Mortgage Insight - Issue 3 - June 2015
Rate changes from 1st April 2015Lender Date change Product Original rate Current rate Rate change
Aviva 20/4/2015 Flexi 5.16% 5.1% v 0.06%
20/5/2015 Flexi Enhanced (5.74% system) 5.10% 5.40% ^ 0.3%
Lump (6.79% system) 5.21% 5.48% ^ 0.27%
Please note with Aviva each case is individually assessed on the pricing tool – 0800 612 5423
Hodge Retirement 4.39%
Lifetime Flex 6.19%
Lump 5.99%
Just Retirement Roll up 5.59%
1/4/2015 Max lump Increase LTVs 5.99% Higher LTVs up 3%
5/6/2015 Max lump Increase LTVs 6.29% ^ Higher LTVs
Enhanced 6.39%
Just Retirement - offer PRICE MATCH on Loans over £20,000 for 60-74 PLUS £500 CASH BACK
LV= Flexible 6.24%
Lumps Sum 5.99%
More2life Tailored 70 5.69% ^ £250 CB
Tailored Enhanced 6.43% 50K. £75=£90075K.125=£1400£125K.175K = £1750 & £175K+ = £2250
17/4/15 Interest Increase LTVs ^ Higher LTVs upto 4%
20/5/15 Tailored Increase LTVs ^ Higher LTV’s up to 2%
2/6/15 Tailored healthy Increase LTVs ^ Higher LTV’s up to 1.9%
Newlife Flexible 5.05%
Flexible Plus 5.25%
Lump 5.75%
Partnership Lump 6.35%
Pure Draw Down 1 6.39%
Draw Down 2 6.39% 5.99%
Lump 1 6.19%
5/6/2015 Lump 1 6.49% ^ Higher LTVs
Lump 2 5.99% v
5/6/2015 Lump 2 6.29% ^ Higher LTVs
4/4/15 Lump 1 Increase LTVs Higher LTVs up to 3%
4/4/15 Lump 2 Increase LTVs Higher LTVs up to 3%
28/5/15 New Max DD1 Increase LTVs 6.45% Higher LTVs £800 broker & £600 sols, no ARR and free val
28/5/15 New Max DD2 Increase LTVs 6.33% Higher LTVs £600 Solicitors and free val
Retirement Advantage (formerly Stonehaven)
11/5/15 Interest-Gold 5.6% Higher LTVs up 5%
11/5/15 Int Platinum 6.49% Higher LTVs up 5%
11/5/15 Lump Gold 6.05% Higher LTVs up 5%
11/5/15 Lump Platinum 6.31% Higher LTVs up 5%
11/5/15 Voluntary Gold 6.16% Higher LTVs up 5%
11/5/15 Vol Platinum 6.54% Higher LTVs up 5%
11/5/15 ALL range Increase LTV’s Higher LTVs up 5%
Retirement Advantage 16th March switch from gilts to % ERCs Year 1-5 = 5% year 6-8 = 3% year 9 + = nil.Retirement Advantage 16th March offer reserves on all of range with rate loading of 0.2%
7Brought to you by The Premier Equity Release Club. Contact our free helpdesk on 0800 612 5423.
Should the pension pot be used to clear an interest only mortgage?
Contact James Young, Hodge LifetimeTel: 07977 562 422
Email: [email protected]
Visit: www.hodgelifetime.com
In retirement clearing any debt is a good thing as this pro-
vides immediate increased disposable income,
however there are a number of issues that retirees need
to consider.
If the client is going to consider using their pension fund/s
for paying off debt then they need to look carefully at the
pros and cons and for this and independent advice must be
taken.
There are a number of potential pitfalls involved in using
the pension pot to achieve this desired goal, however
there are also a number of alternatives that should be con-
sidered too, such as help from family, using other available
funds/assets or as an alternative, using equity release, to
name but a few.
No decision should be taken lightly, there are consequenc-
es from all options and it’s about the client finding the right
one for them. Therefore, independent advice is an absolute
must to ensure the correct course is taken.
Contact BridgewaterTel: 0800 032 2118
Email: [email protected]
Visit: www.bridgewaterequityrelease.co.uk
Intermediary guide for the Retirement Mortgage The Retirement Mortgage from Hodge Lifetime has filled the
gap between the residential mortgage market and the tradi-
tional roll up equity release market.
Designed to offer the flexible features of a residential
mortgage alongside the benefit of a lifetime term, customers
are required to make monthly interest payments and can also
make capital repayments of up to 10% per annum in the first
five years. From year six onwards, the loan can be repaid in
part or full with no early repayment charge.
The Retirement Mortgage is available solely via
financial intermediaries and this short guide has been pro-
duced as a ready reckoner on product features, customer
profiles and offering hints and tips on affordability and evi-
dence
For a copy of the guide or for further information please con-
tact your Business Development Manager on 02920 371
725, email [email protected] or visit
www.hodgelifetime.com
This article is intended for the use of financial intermediaries only.
The Premier Equity Release ClubS h a r i n g w i t h y o u t h e r i g h t w a y t o d o E q u i t y R e l e a s e
www.thepremierequityreleaseclub.co.ukhelpdesk@thepremierequityreleaseclub.co.uk
0800 612 5423
Equity Release & Holistic PlanningBy Rob Brennan, Compliance Director, The Right Equity Release
Experts in the Equity Release industry have been debating the expected fallout from the recent pension reforms. Will it effect lending? If so, by how much?
I suspect that we will not know the actual answer until later
in the year, perhaps into the following year but one thing is
for sure, the consumer now has far more choice about
how they fund their retirement. It follows that options
allow for choices and this means that there are more op-
portunities to make bad decisions. Going forward quality
advice will be even more essential and possibly more com-
plicated than it has been in the past.
Advisers that have mortgage and equity release permis-
sions will need to work hand in hand with those who are
qualified and licensed to provided holistic financial planning
where unvested pension pots exist. It is probable that our
clients may be best served with a combination of tax effi-
cient, flexible pension advice, hopefully ensuring that in-
come is available into the future whilst using their property
to fund capital expenditure.
Debt repayment, whether it is secured or unse-
cured will continue to be an issue in the years to come. Ask
most retirees if they would like to pay £10,000 off credit
card debt or have £500 per annum for the rest of their lives
and they are likely to opt for the debt repayment option. It
is usually the same answer with mortgage debt given that
lenders are not extending lending terms. These options
could require advice in terms of pension options, attitude
to risk, tax implications and investment opportunities. This
advice must come from properly licensed advisers.
For the British, house ownership is emotional, in general,
we don’t see our home solely as an investment. The com-
bined resources of property and pension must be used in
order to ensure that our clients receive the best possible
outcome in their retirement.
The government were right when they said they trusted us
not to go out and blow our pension pots on Lamborghinis,
I for one will not be buying shares in the company but the
consumer does have needs. Those needs might not be as
exciting as a super car but they are there and they are real.
A combination of good advice and correct asset utili-
sation will ensure that those needs are met for those who
have the luxury of choice.
Contact Rob Brennan, TRERTel: 07816 821 309
Email: [email protected]
Visit: www.therightequityrelease.co.uk