Table of Contents
Overview
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- What you need to know
- Key issues covered in this Report
- Products covered in this Report
- Equity Release Council
Executive Summary
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- The market
- COVID-19 will hit lending in 2020, but future prospects still look positive
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- Figure 1: Forecast value of new equity release schemes sold, adjusted for COVID-19, 2014-24
- A fall in new customers drives a decline in new business in 2019
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- Figure 2: Volume of equity release customers, by type of activity, 2017-19
- House price growth was slowing before COVID-19
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- Figure 3: Average house price in the UK, March 2012-February 2020
- Over-45s are more pessimistic about future economic prospects
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- Figure 4: Perceived impact of the COVID-19 outbreak on UK economic growth, by age, 30th April-7th May 2020
- Home/garden improvements and holidays are the most popular uses
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- Figure 5: Popular uses of equity release, 2019
- Equity Release Council bolsters consumer protection
- Impact of COVID-19 on equity release
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- Figure 6: Expected impact of COVID-19 on equity release short, medium and long term, 19 May 2020
- Companies and brands
- Legal & General, JRP Group and LV= saw sales decline in 2019…
- …but Aviva and More2Life increased lending
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- Figure 7: Estimated equity release market share, 2019
- COVID-19 drives innovation in the market
- New product developments bring greater flexibility and choice
- The consumer
- Declining confidence in sources of retirement income…
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- Figure 8: Expected/actual sources of retirement income, 2016-20
- …but people remain positive about their eventual retirement prospects
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- Figure 9: Financial situation at retirement age, February 2020
- Equity release remains a niche proposition
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- Figure 10: Consideration of equity release, February 2020
- Over 40% would opt to receive funds as a lump sum
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- Figure 11: Equity release funding options, February 2020
- Overcoming negative perceptions continues to be a major challenge
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- Figure 12: Concerns about equity release, February 2020
- Only one in four have sought retirement advice
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- Figure 13: Attitudes towards equity release advice, February 2020
- Long-term care and helping out family are the major drivers
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- Figure 14: Motivations for considering equity release, February 2020
- What we think
The Impact of COVID-19 on Equity Release
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- Short, medium and long-term impact on the industry
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- Figure 15: Expected impact of COVID-19 on Equity Release short, medium and long-term, 19 May 2020
- Short term:
- Medium term:
- Long-term:
- Opportunities and Threats
- Uncertainty will damage sales in the short-term
- Lockdown poses a logistical challenge for providers
- More people will be looking for retirement planning advice
- An increased desire to help out families…
- …and make up for lost time
- Impact on the equity release market
- New lending forecast to recover from an initial decline
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- Figure 16: Forecast value of new equity release schemes sold, adjusted for COVID-19, 2014-24
- Shifts in consumer behaviour
- Financial confidence drops
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- Figure 17: The financial confidence index, January 2016-April 2020
- A shift in retirement funding expectations
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- Figure 18: Expected/actual sources of retirement income, 2016-20
- Impact on key consumer segments
- 55-64 year olds are more likely to feel the impact of a recession
- Mortgage holders are more likely to need to revaluate position
- Empty nesters have a desire to get away
- How a COVID-19 recession will reshape the market
- The impact on the market will be relatively short-lived
- A different type of recession
- Falling rates and a drive for more flexibility
- Impact on the marketing mix
- Face-to-face advice will remain the focus
- Expanding the reach through direct channels and partnerships
- Product flexibility will be in demand
- A focus on family and living life to the full will drive engagement
- COVID-19: Market context
Issues and Insights
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- COVID-19 will drive greater discussion around retirement funding
- The facts
- The implications
- Changing perceptions has become more important than ever
- The facts
- The implications
The Market – What You Need to Know
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- New business declines in 2019…
- …driven by a fall in new customers
- House price growth was slowing before COVID-19
- Over-45s are more pessimistic about future economic prospects
- Home and garden improvements and holidays the most popular uses
- Equity Release Council bolsters consumer protection
Market Size and Forecast
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- Economic uncertainty results in a decline in new business in 2019
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- Figure 19: New sales of equity release products, by volume and value, 2012-19
- COVID-19 market forecast
- Sharp decline predicted in 2020
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- Figure 20: Forecast value of new equity release schemes sold, adjusted for COVID-19, 2014-24
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- Figure 21: Forecast value of new equity release schemes sold, adjusted for COVID-19, 2014-24
- Figure 22: Forecast volume of new equity release schemes sold, adjusted for COVID-19, 2014-24
- Figure 23: Forecast volume of new equity release schemes sold, adjusted for COVID-19, 2014-24
- Pre-COVID-19 forecast: a swift return to growth was expected
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- Figure 24: Forecast value of new equity release schemes sold, 2014-24
- Figure 25: Forecast value of new equity release schemes sold, 2014-24
- Figure 26: Forecast volume of new equity release schemes sold, 2014-24
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- Figure 27: Forecast volume of new equity release schemes sold, 2014-24
- Forecast methodology
Market Segmentation
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- Returning customers increase, but new customers decline in 2019
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- Figure 28: Volume of equity release customers, by type of activity, 2017-19
- Drawdown options account for 64% of new sales
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- Figure 29: Proportional distribution of new equity release sales, by product type, 2013-19
- Average amount accessed declines for new drawdown customers
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- Figure 30: Average amount of property wealth accessed, by product type, 2017-19
Market Drivers
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- Equity release target market is set to continue to grow
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- Figure 31: UK population, by lifestage, mid-2018-mid-2043
- House price growth was slowing before the COVID-19 outbreak
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- Figure 32: Average house price in the UK, March 2012-February 2020
- Over-45s have a more negative outlook on the economy
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- Figure 33: Perceived impact of the COVID-19 outbreak on UK economic growth, by age, 30th April-7th May 2020
- Later-life lending market also declined in 2019
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- Figure 34: Volume of lifetime mortgage sales vs volume of mortgage sales to customers aged 56+, 2014-19
- Home/garden improvements and holidays the most popular uses
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- Figure 35: Popular uses of equity release, 2019
- Proportion of owner-occupiers aged 55-64 is declining
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- Figure 36: Tenure in households with the household reference person aged 55-64, 2008/09-2018/19
Regulatory and Legislative Changes
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- FCA takes exploratory measures into the later-life lending market
- ERC bolsters consumer protection…
- …and updates its legal advice rules following COVID-19
- Further confusion over the launch of Pensions Dashboard
Companies and Brands – What You Need to Know
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- Legal & General, JRP Group and LV= saw sales decline in 2019…
- …but More2Life and Aviva increased lending
- COVID-19 drives innovation in the market
- New product developments bring greater flexibility and choice
- Total advertising expenditure declines
Market Share
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- Legal & General, JRP Group and LV= saw sales decline in 2019…
- …while More2Life, Aviva and Pure Retirement increased lending
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- Figure 37: Estimated equity release market share, 2019
Competitive Strategies
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- Providers respond to the COVID-19 outbreak
- Brands turn to remote valuations…
- …while More2Life and LV= guarantee rates and product features for those ineligible
- New advisory developments
- Legal & General launches in-house advice business
- Openwork expands its equity release offering
- A new comparison tool for advisers launches
- Key and ABAKA investigate the power of AI for equity release advice
- More2Life unveils new lending criteria tool
- New product developments bring greater flexibility and choice
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- Figure 38: Number of equity release product options and features, 2019 and 2020
- Aviva enhances its repayment options
- More2Life updates its tailored range
- Legal & General introduces downsizing protection
Advertising and Marketing Activity
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- Above-the-line adspend falls in 2020…
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- Figure 39: Total above-the-line, online display and direct mail advertising expenditure on equity release, 2017-20
- … But the largest advertisers increase expenditure
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- Figure 40: Above-the-line, online display and direct mail advertising expenditure on equity release, by advertiser, 2017-20
- TV accounts for close to half of total expenditure
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- Figure 41: Above-the-line, online display and direct mail advertising expenditure on equity release, by media type, 2020
- Note about adspend
The Consumer – What You Need to Know
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- Declining confidence in sources of retirement income…
- …but people remain positive about their eventual retirement prospects
- Equity release remains a niche proposition
- Over 40% would prefer to receive funds as a lump sum
- Overcoming negative perceptions will prove to be a major challenge
- Only one in four have sought retirement advice
- Long-term care and helping out family are the major drivers
Sources of Retirement Income
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- COVID-19 drives a shift in expectations around retirement funding
- Equity release remains a niche proposition
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- Figure 42: Expected/actual sources of retirement income, 2016-20
- The appeal of downsizing declines among over-65s
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- Figure 43: Expected/actual sources of retirement income, by age, February 2020
- Less than half of those with moderate means expect to use a private pension
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- Figure 44: Expected/actual sources of retirement income, by ACORN group, February 2020
Financial Confidence in Retirement
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- Over 80% expect retirement finances to be OK
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- Figure 45: Financial situation at retirement age, February 2020
- Confidence is higher amongst the retired
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- Figure 46: Financial situation at retirement age, by employment status, February 2020
- Building on existing confidence is vital for the over-65s
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- Figure 47: Financial situation at retirement age, by age, February 2020
Consideration of Equity Release
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- Interest in equity release remains unchanged
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- Figure 48: Consideration of equity release, February 2020
- Interest is highest among the less confident
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- Figure 49: Consideration of equity release, by financial confidence in retirement, February 2020
- Consideration is highest among 45-64s
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- Figure 50: Consideration of equity release, by age, February 2020
Equity Release Funding Options
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- Lump-sum funding options are preferred
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- Figure 51: Equity release funding options, February 2020
- 45-54s are the most interested in receiving regular payments
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- Figure 52: Equity release funding options, by age, February 2020
- Greater flexibility appeals to those considering equity release
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- Figure 53: Equity release funding options, by consideration of equity release, February 2020
Concerns about Equity Release Schemes
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- Equity release continues to struggle with negative perceptions
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- Figure 54: Concerns about equity release, February 2020
- Concerns about inheritance continue to be a barrier
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- Figure 55: Concerns about equity release, by consideration of equity release, February 2020
Attitudes towards Equity Release Advice
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- Only one in four have sought retirement advice
- Brand familiarity is also a factor when looking for advice
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- Figure 56: Attitudes towards equity release advice, February 2020
- Those paying off mortgage are looking for general retirement advice
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- Figure 57: Attitudes towards equity release advice, by housing situation, February 2020
Motivations for Considering Equity Release
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- Changing perceptions will be a challenge
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- Figure 58: Motivations for considering equity release, February 2020
- Long-term care is less of a factor for over-65s
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- Figure 59: Motivations for considering equity release, by age, February 2020
- COVID-19 will increase focus on family and boosting income
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- Figure 60: Motivations for considering equity release, by consideration of equity release, February 2020
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Additional best-case/worst-case forecast tables (Pre-COVID-19 forecasts)
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- Figure 61: Best- and worst-case forecast for the value of new equity release schemes sold (pre-COVID-19 forecast), 2019-24
- Figure 62: Best- and worst-case forecast for the volume of new equity release schemes sold (pre-COVID-19 forecast), 2019-24
- Forecast methodology
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