Table of Contents
Issues in the Market
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- Key issues
- Market background and definitions
- Lifetime mortgages
- Shared appreciation mortgages (SAM)
- Home reversion
- Regulation
- SHIP
- Taxation and benefit issues
- Abbreviations
Future Opportunities
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- ‘Eat, drink, and be merry, for tomorrow we die’
- Equity release is about lifestyle…
- …and ‘doing’, rather than ‘owning’
- Hooking the 3Gs
- Huge potential for high street banking brands
- Hybrid mortgage/equity release products
Market in Brief
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- The market falls but is weathering the crunch well
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- Figure 1: Total value and volume of new equity release sales, by SHIP members, 1997-2009
- The future is bright
- Drawdown mortgages drive the market as consumers opt for flexibility
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- Figure 2: The breakdown of the sales of equity release plans, by type of plan sold, 2006-09
- Providers respond with new products
- Norwich Union and Prudential dominate the market
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- Figure 3: Estimated equity release market share+, 2008
- An intermediary-led market
- Providing an income in retirement the top reason for releasing equity
- 13 million potential targets but 6.6 million to really aim at
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- Figure 4: Key sales targets for an equity release offer among homeowners aged 45+, January 2009
Internal Market Environment
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- Key points
- Tighter regulation
- Regulation in Europe
- Not enough brokers
- Constant monitoring
- Still a lack of high street banking names…
- …and past misdoings still taint the industry’s image
- Sale and rent-back risks doing further damage…
- …but tighter regulation is on the cards
- Asking the industry
- A lack of support from the government
- Equity release and IHT
Broader Market Environment
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- Key points
- The old shall inherit the country…
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- Figure 5: Population breakdown, by age (million), 2006-30
- …as people live longer and spend longer in retirement
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- Figure 6: Life expectancy (years) or males and females aged 55+, by current age, 2005-07
- Implications
- The GOTYs are on the march
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- Figure 7: Seniors with a young outlook on life, May 2008
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- Figure 8: The areas over-65s want to spend more on, May 2008
- Lifestyle factors the main motivator for equity release
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- Figure 9: The main motivation for taking on an equity release scheme among Key Retirement Solution new business customers, 2007 and 2008
- The correct targeting of equity release schemes is needed
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- Figure 10: Classification of over-65s (000), by their financial situation, April 2008
- Increasing retirement age
- More older owner-occupiers
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- Figure 11: The number of owner-occupiers aged 60+, by age, 2006-26
- More housing wealth for seniors…
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- Figure 12: The housing wealth for adults aged 60+, by age, 2006-26
- …but the decline in housing prices will have a short-term impact
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- Figure 13: Average mix-adjusted UK house prices (£), Feb 2002-Feb 2009
- Falling interest rates
- Implications
- Loss of lending capacity
Competitive Context
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- Key points
- The key alternatives
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- Figure 14: Alternative sources of retirement income
- Buy-to-let
- HEW and remortgage
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- Figure 15: Housing equity withdrawal (seasonally adjusted), Q1 2000-Q3 2008
- Downsizing
- Sale and rent-back
Strengths and Weaknesses in the Market
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- Figure 16: Equity release products – strengths and weaknesses in the market, 2009
- Market strengths
- Remaining in the home and tenure
- Competitive products cannot generate income
- Equity release market now fully regulated
- Rapidly ageing population
- Weaknesses
- Equity release can be limited
- Requires capital
- Credit crunch
- Potential shortage in the number of qualified advisers
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Who’s Innovating?
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- Key points
- A period of reflection
- Stonehaven Interest Select
- SAFER Equity Release Advice
- Greater focus on IFAs
- First signs of equity release morphing into retirement planning service
Trade Perspective
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- What impact will the credit crunch have on the market?
- What is preventing the market from taking off?
- Media play a role
- Can consumer fears over the quality of advice be allayed?
- Is the market innovating?
Market Size and Forecast
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- Key points
- The crunch bites but not too hard
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- Figure 17: Total value of new equity release sales by SHIP members, 1991-2009
- Average value of loans in decline as the number of new sales also dips
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- Figure 18: Total volume of equity release sales and average value of loan, by SHIP members, 1997-2009
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- Figure 19: The annual percentage change in new business value and plans sold, 1998-2009
- Forecast
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- Figure 20: Equity release forecast, 2004-14
- Long-term growth likely
- Factors used in the forecast
Segment Performance
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- Key points
- Drawdown mortgages the growth sector
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- Figure 21: The breakdown of the sales of equity release plans, by type of plan sold, 2006-09
- Lifetime mortgages now hold 97% of the market
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- Figure 22: The value and volume of new lifetime mortgage sales, 1997-2009
- Falling average values
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- Figure 23: The average value new lifetime mortgage sales, 1997-2009
- A tough time for reversion products
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- Figure 24: The value and volume of new reversion plans, 1997-2009
Market Share
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- Key points
- A new order in the market
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- Figure 25: Estimated equity release market share+, 2008
Companies and Products
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- Key points
- Flexibility and simplification
- Norwich Union revamp
- LV= Flexible Lifetime Mortgage
- LV= age banding
- Lower rates
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- Figure 26: Examples of the rate charged on lifetime mortgages, April 2008
- Marginal falls in loan to value
- The big banks: can’t play, won’t play
- Profiles of the main providers
- Norwich Union Equity Release Limited
- Prudential plc
- Just Retirement Solutions
- In Retirement Services
- New Life Mortgages
- Hodge Lifetime
- Profiles of other providers (ranked alphabetically)
- Bridgewater Equity Release (Granger Plc)
- Coventry Building Society
- LV=
- Milton Homes (Retirement Plus)
- National Counties Building Society
- Northern Rock Plc
- Partnership Home Loans
- Saffron Walden Building Society
- Sovereign Reversions Plc (Home and Capital)
- Stonehaven
- Profiles of major advisers
- Age Partnership
- Key Retirement Solutions (KRS)
- Equity Release Solutions
Brand Communication and Promotion
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- Key points
- Main media spending rising
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- Figure 27: Main media spending on equity release plans, 2004-08
- Direct mail the dominant form of promotion
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- Figure 28: Main media spending on equity release plans (£000), by media channel, 2004-08
- Aviva continues to spend the most on advertising
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- Figure 29: Top ten equity release advertisers, 2004-08
Channels to Market
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- Key points
- Intermediary sector of growing importance
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- Figure 30: Breakdown of value sales of equity release products from SHIP members, by distribution channel, 2003-09
- …and now responsible for almost two thirds of plan sales
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- Figure 31: Volume sales of equity release products from SHIP members, by distribution channel, 2003-09
- Intermediaries sell almost 18,000 plans in 2008
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- Figure 32: Volume and value sales of equity release products from SHIP members, via intermediaries, 2003-09
- Direct sales falling close to £200 million
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- Figure 33: Volume and value sales of equity release products from SHIP members, via direct channels, 2003-09
- More than a third say they had or would seek the help of an adviser
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- Figure 34: Agreement with statements about arranging equity release, February 2008
- Search for wider distribution
- LV= and Intrinsic
- Key Retirement Solutions Premier Partners
- Intermediaries are getting more support
The Consumer – The Target Market
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- Key points
- Almost 13 million potential targets
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- Figure 35: The number of over-55s owning their home, January 2009
- Affluent adults more likely to have equity but don’t ignore the less affluent
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- Figure 36: The percentage of over-55s owning their home, by socio-economic group, January 2009
- Most over-55 homeowners are reasonably comfortable
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- Figure 37: Home ownership, by ACORN group, January 2009
- Use of equity release has barely scratched the surface
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- Figure 38: The equity release market, by age, January 2009
- Less affluent adults constitute over 50% of the market…
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- Figure 39: The equity release market, by socio-economic group, January 2009
- …and an ample supply of potential new customers in the next 20 years
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- Figure 40: The proportion of homeowners, by age, January 2009
- Mortgage debt to decline for potential equity release targets
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- Figure 41: The average length of time before a mortgage is paid off, by age group, January 2009
The Consumer – Attitudes and Behaviour
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- Key points
- Equity release becoming more popular
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- Figure 42: Attitudes towards the concept of equity release, 2008 and 2009
- Implications
- Who is open to an offer?
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- Figure 43: Segmentation of consumers, by their openness to an equity release offer, January 2009
- Education can greatly widen the number of primed homeowners
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- Figure 44: View of consumers on equity release, by their openness to an equity release offer, January 2009
- High street banking brands could make a killing
- The future looks good for equity release
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- Figure 45: The proportion of adults primed for an equity release offer, by age, January 2009
- Outright owners the hardest market to hit
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- Figure 46: Penetration of target groups, by socio-economic group, ACORN group and home ownership, January 2009
The Consumer – The Uses of Equity Release
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- Key points
- Immediate needs drive the market…
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- Figure 47: Reasons for releasing equity, 2008 and 2009
- …but a different set of priorities for the key targets
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- Figure 48: Reasons for releasing equity, by target group, January 2009
- Implications and opportunities
- Lifestyle factors more important for adults pre-retirement
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- Figure 49: The main motivations for taking out an equity release plan, by age and lifestage, January 2009
- Implications and opportunities
- C1C2s focused on income generation
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- Figure 50: The main motivations for taking out an equity release plan, by socio-economic group and ACORN group, January 2009
The Consumer – Further Analysis
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- Key points
- You must educate to accumulate
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- Figure 51: Segmentation of consumers, by knowledge of the benefits of equity release, January 2009
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- Figure 52: Reasons for releasing equity, by knowledge of the benefits of equity release, January 2009
- Older retired, outright owners in most need of education
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- Figure 53: Penetration of those in need of education, by age, lifestage, marital status and home ownership, January 2009
- The ranking of potential sales targets
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- Figure 54: The ranking of sales targets for an equity release offer among homeowners aged 45+, January 2009
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- Figure 55: The number of sales targets (000) for an equity release offer among homeowners aged 45+, January 2009
- Little penetration of the target market
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- Figure 56: Gap analysis of equity release schemes, January 2009
- Hot Prospects are non-retired of Moderate Means
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- Figure 57: Equity release Hot Prospects, by age, socio-economic group, home ownership and ACORN group, January 2009
- Warm Prospects come from slightly more affluent neighbourhoods
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- Figure 58: Equity release Warm Prospects, by age, socio-economic group, home ownership and ACORN group, January 2009
- Hot Prospects are more self-centred than Warm Prospects
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- Figure 59: The reasons for taking out an equity release plan, by prospect group, January 2009
- Most adults have one or two reasons for using equity release
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- Figure 60: The number of reasons for choosing equity release, by sales targets groups, January 2009
- Younger and more affluent adults have more reasons to choose equity release
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- Figure 61: The average number of reasons for choosing equity release, by age, socio-economic group and ACORN group, January 2009
- Building reputation will drive Warm Prospects to the market
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- Figure 62: Attitudes towards equity release, by prospects groups, January 2009
- Improving advice will drive the market generally
- Downsizing a key competitive threat among Warm Prospects
Appendix – The Consumer – Attitudes and Behaviour
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- Figure 63: Penetration of equity release target groups, by demographic sub-group, January 2009
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Appendix – The Consumer – The Uses of Equity Release
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- Figure 64: The main motivating factors for taking out an equity release plan, by demographic sub-group, January 2009
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Appendix – The Consumer – Further Analysis
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- Figure 65: Knowledge of the benefits of equity release, by group, by demographic sub-group, January 2009
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- Figure 66: Penetration of sales targets, by demographic sub-group, January 2009
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