Table of Contents
Issues in the Market
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- Key issues
- Scope of the report
- Target market
- Market definitions
- Lifetime mortgage
- Home reversion plan
- Home income plan
- Tax implications
- Safe Home Income Plans (SHIP)
- Abbreviations
Future Opportunities
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- Changing the consumer mindset
- Addressing new and diverging customer needs
- The product needs to evolve in response to changing social and economic dynamics
Market in Brief
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- The size of the target market
- Recent sales performance
- Short-term outlook
- Good long-term prospects
- Market movements
- Competitive environment
- Distribution trends
- Adspend cutback
- Current financial situation of the over-55s
- Retirement plans of the under-65s
- Expected retirement income sources
- Attitudes towards equity release
Internal Market Environment
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- Key points
- Funding difficulties and downturn force some companies to withdraw
- Market needs fresh investment
- Average property prices continue on their long-term upward trend
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- Figure 1: UK average house prices – former owner-occupiers (not seasonally adjusted), Q1 2000-Q4 2009
- Changes to IHT rules have reduced need for ERS as a tax-planning tool
- Equity release could help fund social care
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- Figure 2: Average annual long-term care costs, by region, 2008
- Social Care White Paper
- The long-term care bill will nearly double in two decades
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- Figure 3: Population projections and effects on demand for long-term care – England, 1996-2031
- Recent legislative changes benefit ERS
Broader Market Environment
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- Key points
- Main market drivers
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- Figure 4: Summary of the main factors driving demand for equity release schemes, 2010
- Ageing population expands target market
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- Figure 5: UK population, by age, 2008-27 (2008-based projection)
- Increasing longevity means retirement savings must stretch for longer
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- Figure 6: Expectation of life at age 55, by gender – UK, 1981-2058
- Household income peaks around age 50
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- Figure 7: Annual GB household income before tax, by age, 2009
- Just over two fifths of pensioner income is derived from state benefits
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- Figure 8: Average pensioner income, by source, at current prices, 2007/08
- More than two thirds of the over-65s own their home outright
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- Figure 9: Tenure, by age of household reference person – England, 2008
- An expanding target market
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- Figure 10: Projected number of owner-occupier households owned by the over-60s – UK, by age and type of household, 2006-26
- Over-60s’ housing wealth valued at nearly £1 trillion
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- Figure 11: Projected number and value of owner-occupier properties owned by the over-60s, by type, 2006-26
Competitive Context
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- Key points
- ERS has a place in mainstream retirement planning
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- Figure 12: Ownership of private pensions and savings and investment products, by age, December 2009
- ERS offers a potential alternative to downsizing
- ERS is a very different proposition from sale-and-rent-back
Market SWOT Analysis
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- Figure 13: Equity release scheme market – SWOT analysis, 2010
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Who’s Innovating?
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- Key points
- Recent developments
- Achievements over the past two decades
- The market will continue to evolve to meet changing customer needs
Trade Perspective
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- Change in public perception needed
- Government needs to clarify its position
- Funding remains a significant problem for some
- Limited product development recently
- A multitude of customer types with varying needs
- The market is expected to remain flat in 2010…
- …but the long-term prognosis is positive
Market Size and Forecast
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- Key points
- A small market with great potential
- The market contracted further in 2009, due to the effects of the credit crunch
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- Figure 14: Volume and value of new equity release plan sales, 2004-09
- Slow recovery forecast
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- Figure 15: Forecast of new equity release plan sales, 2005-15
- Factors incorporated
Market Segmentation
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- Key points
- Home reversion plans fell by 57% in 2009
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- Figure 16: Volume of new lifetime mortgage and home reversion plan sales, 2006-09
- Lifetime mortgages accounted for 98% of ERS sales in 2009
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- Figure 17: Volume of new equity release plan sales, by type, 2004-09
- Figure 18: Value of new equity release plan sales, by type, 2004-09
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- Figure 19: Average value of lifetime mortgage versus home reversion plan, 2004-09
Regional and Usage Trends
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- Key points
- Demand for equity release varies from region to region
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- Figure 20: Volume and value of equity release schemes, average LTV and average customer age, by region, 2009
- ERS customers are typically aged 60-79
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- Figure 21: Distribution of equity release schemes, by age of customer, 2009
- Growth in people taking out equity release to repay unsecured debt in 2009
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- Figure 22: Popular uses of equity release, 2008 and 2009
- No longer a ‘single’ market, with new customer types emerging
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- Figure 23: Typical customer types with equity release needs, July 2009
Market Share
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- Key points
- Aviva cements its market leader position in 2009
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- Figure 24: Top five equity release providers, by new sales value, 2008 and 2009
Companies and Products
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- Aviva
- Bridgewater Equity Release
- Hodge Lifetime
- Home & Capital
- Just Retirement
- LV=
- New Life Mortgages
Brand Communication and Promotion
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- Key points
- Adspend on equity release fell by more than a quarter in 2009
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- Figure 25: Total advertising expenditure on equity releases schemes, 2005-09
- Aviva became the top ERS advertiser in 2009
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- Figure 26: Top 15 advertisers of equity releases schemes, 2007-09
- Direct mail accounted for over 60% of adspend in 2009
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- Figure 27: Equity releases schemes adspend, by media type, 2007-09
Channels to Market
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- Key points
- Intermediaries play a major role in the market
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- Figure 28: Share of equity release sales (volume), by distribution channel, 2005-09
- Overcoming obstacles to increase adviser support
- Potential implications of the RDR
The Over-55s – Financial Situation and Prospects
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- Key points
- One in 12 over-55s are struggling or in financial difficulty
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- Figure 29: Personal financial situation – all adults versus over-55s, March 2010
- The over-55s are most likely to spend their spare cash on dining out
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- Figure 30: Typical uses of discretionary spending – over-55s, March 2010
- Recession has had a major impact on one in five over-55s
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- Figure 31: Impact of the economic downturn – all adults versus over-55s, March 2010
- In particular, savings have suffered
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- Figure 32: Effects of the economic downturn on personal finances/wealth – all adults versus over-55s, March 2010
- One in seven over-55s are really worried about their financial future
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- Figure 33: Consumer sentiment in regards to own future financial situation – all adults versus over-55s, March 2010
The Under-65s – Retirement Plans and Aspirations
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- Key points
- Those nearing pension age have more realistic aspirations
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- Figure 34: Age expected to retire, by age, June 2009
- Retirement expectations change with age
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- Figure 35: Financial expectations at retirement, by age, June 2009
- Less than half of all non-retired adults have a pension
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- Figure 36: Retirement products owned, by age, June 2009
- 45% of those aged 55-64 believe they won’t be able to get by on the state pension alone
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- Figure 37: Attitudes towards retirement and retirement planning, by age, June 2009
The Consumer – Sources of Retirement Income
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- Key points
- About Mintel’s consumer survey
- Most people are relying on a state pension to help fund their retirement
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- Figure 38: Expected or actual sources of income post-retirement, February 2010
- Around one in eight mortgage holders expect to downsize
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- Figure 39: Expected or actual sources of income post-retirement, by tenure, February 2010
- Retirement income plans change with age
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- Figure 40: Expected or actual sources of income post-retirement, by age, February 2010
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- Figure 41: Number of expected or actual sources of income post-retirement, by age, February 2010
- Men aged 65+ are a key target group
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- Figure 42: Expected or actual sources of income post-retirement, by combined gender and age – over-45s only, February 2010
The Consumer – Ownership and Consideration of ERS
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- Key points
- 1% of outright homeowners have equity release
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- Figure 43: Consideration of equity release scheme to help fund retirement, by tenure, February 2010
- Younger adults are more open to considering equity release
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- Figure 44: Consideration of equity release scheme to help fund retirement, by age, February 2010
- Men over state pension age are most likely to have ERS
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- Figure 45: Consideration of equity release scheme to help fund retirement, by combined gender and age – over-45s only, February 2010
The Consumer – Attitudes Towards ERS
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- Key points
- Less than a third of homeowners want their family to inherit their home
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- Figure 46: Attitudes towards equity release scehmes, by tenure, February 2010
- The under-35s are more open to the idea of equity release
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- Figure 47: Attitudes towards equity release scehmes, by age, February 2010
- Men are generally more pragmatic when it comes to their home and more pro equity release
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- Figure 48: Attitudes towards equity release scehmes, by combined gender and age, February 2010
- Further analysis
Appendix 1 – Profile of the Target Market
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- Figure 49: Demographic profile of the target market, February 2009
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Appendix 2 – Sources of Income by Demographics
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- Figure 50: Expected or actual sources of retirement income, by demographics, February 2010
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Appendix 3 – Consideration of ERS by Demographics
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- Figure 51: Consideration of equity release schemes, by demographics, February 2010
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Appendix 4 – Profile of ERS Customers and Prospects
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- Figure 52: Demographic profile of existing ERS customers and potential prospects, February 2010
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