Table of Contents
Introduction
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- Abbreviations
Executive Summary
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- The market
- Equity release is set for a steady recovery
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- Figure 1: Forecast of the number of new equity release plan sales – fan chart, 2005-15
- Drawdown is currently the most successful segment of the market
- A small market but with a large target audience
- Market factors
- Social trends and policy changes exert a positive influence over the market
- Customer characteristics and motivations
- Companies, brands and innovation
- Post-crunch, the market has become highly concentrated
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- Figure 2: Leading equity release providers, by new sales value, 2010
- Intermediaries generate the lion’s share of sales
- Adspend is cut back following market exits
- The consumer
- Financial situation of the over-55s has deteriorated slightly over the past year
- Retirement plans
- Expected retirement income sources
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- Figure 3: Expected or actual sources used to fund retirement, February 2011
- Ownership of and attitudes towards equity release
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- Figure 4: Attitudes towards equity release schemes, February 2011
- What we think
Issues in the Market
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- What impact has the financial crisis had on the equity release market?
- Does the recent decline in new business give a false impression of the current health of the market?
- What are the long-term prospects for the equity release market?
- What are the main barriers operating in the market, and how can these be overcome?
- What's in a name? Does the industry need to rethink how it defines itself?
Future Opportunities
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- Trend: Using the home to fund retirement
- Trend: Catering for a multitude of customer types and needs
Internal Market Environment
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- Key points
- Property prices are expected to remain flat during 2011
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- Figure 5: UK average house prices – former owner-occupiers (not seasonally adjusted), Q1 2000-Q4 2010
- Changes to IHT rules have reduced need for tax mitigation
- The annual cost of long-term care runs into thousands of pounds
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- Figure 6: Average annual long-term care costs, by region, 2010
- Long-term care bill set to nearly double within two decades
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- Figure 7: Population projections and effects on demand for long-term care – England, 1996-2031
- The Commission on Funding of Care and Support
- Simplifying the state pension
- Recent legislative changes benefiting ERS
Broader Market Environment
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- Key points
- Main market drivers
- Ageing population expands target market
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- Figure 8: UK population, by age, 2008-27 (2008-based projection)
- Increasing longevity has significant financial implications
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- Figure 9: Expectation of life at age 55, by gender – UK, 1981-2058
- Household income tends to decline from age 55
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- Figure 10: Annual GB household income before tax, by age, 2010
- Average annual pensioner income is around £21,000
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- Figure 11: Average pensioner income, by source, at current prices, 2008/09
- More than three quarters of over-65s are owner-occupiers
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- Figure 12: Tenure, by age of household reference person – England, 2009/10
- Huge potential to expand the equity release market
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- Figure 13: Projected number of owner-occupier households owned by the over-60s – UK, by age and type of household, 2006-26
Competitive Context
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- Key points
- Equity release forms part of the arsenal of retirement-planning solutions
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- Figure 14: Ownership of pensions, property and other assets, by age, September 2010
- Low pension participation prompts people to look at the alternatives
- ERS offers a useful alternative to downsizing
- Tighter regulation of sale-and-rent-back schemes
Market SWOT Analysis
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- Figure 15: Equity release market – SWOT analysis, 2011
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Who’s Innovating?
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- Key points
- Some innovative products have recently emerged
- Industry achievements over the past two decades
- The move towards greater flexibility continues
Trade Perspective
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- About the participating companies
- The industry needs to raise the public awareness and understanding
- Providers feel that ‘equity release’ aptly describes their market
- A government department needs to take ‘ownership’ of equity release
- Innovation slowly returns to the market
- Providers expect to see a steady pick-up in new business in 2011
- Assessing the impact of a sluggish housing market and the prospect of higher interest rates
- Long-term prospects are sound, although there are challenges to overcome in the short term
- Home reversion providers want a level playing field in the advice arena
Market Size and Forecast
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- Key points
- A small market currently, but with good growth potential
- Overall SHIP member sales fell again in 2010…
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- Figure 16: Volume and value of new equity release plan sales, 2005-10
- …but several providers still active in the market managed impressive growth rates
- Steady recovery forecast
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- Figure 17: Forecast of the number of new equity release plan sales – fan chart, 2005-15
- Figure 18: Forecast of the value of new equity release plan advances – fan chart, 2005-15
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- Figure 19: Forecast of new equity release plan sales, 2005-15
- Forecast methodology
- Fan chart explanation
Market Segmentation
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- Key points
- Drawdown mortgages represent the largest slice of new business…
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- Figure 20: Value of new equity release sales, by product type, 2010
- …and have done so since 2008, in terms of volume sales
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- Figure 21: Volume of new equity release sales, by product type, 2006-10
- Home reversion plans represent a small proportion of the market
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- Figure 22: Volume of new equity release plan sales, by type, 2006-10
- Figure 23: Value of new equity release plan sales, by type, 2006-10
- Average plan values vary depending on the product type
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- Figure 24: Average new plan value, by product type, 2010
Regional and Usage Trends
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- Key points
- Demand for equity release varies from region to region
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- Figure 25: Volume and value of equity release schemes, average LTV and average customer age, by region, 2010
- The average customer is aged 69
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- Figure 26: Distribution of equity release schemes, by age of customer, 2010
- Most common reason for releasing equity is to fund home improvements
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- Figure 27: Popular uses of equity release, 2008-10
- Multiple customer types
Market Share
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- Key points
- Top three providers all grew their share in 2010
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- Figure 28: Top five equity release providers, by new sales value, 2008-10
- Credit crisis has resulted in a highly concentrated market…
- …but the tide of recent market exits appears to have now turned
Companies and Products
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- Aviva
- Just Retirement
- LV=
- Key Retirement Solutions
- Significant others
Brand Communication and Promotion
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- Key points
- Adspend on equity release products fell again in 2010
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- Figure 29: Total advertising expenditure on equity releases schemes, 2006-10
- Aviva again spent the most on advertising its equity release plans in 2010
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- Figure 30: Top 15 advertisers of equity releases schemes, 2008-10
- Direct mail accounts for the largest share of industry adspend
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- Figure 31: Adspend on equity releases schemes, by media type, 2008-10
Channels to Market
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- Key points
- Intermediaries play an increasingly vital role in the market
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- Figure 32: Share of equity release sales (volume), by distribution channel, 2006-10
- Providers continue to seek more advisers to enter the market
- Many advisers expect the RDR and MMR to have little impact on the equity release market
- Concerns raised about FSA’s treatment of equity release
The Over-55s – Financial Situation and Prospects
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- Key points
- One in ten over-55s are struggling or in financial difficulty
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- Figure 33: Personal financial situation – all adults versus over-55s, March 2010 and February 2011
- The over-55s are most likely to spend their spare cash on dining out
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- Figure 34: Typical uses of discretionary spending – over-55s only, March 2010 and February 2011
- Economic downturn has had a major impact on one in six over-55s
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- Figure 35: Impact of the economic downturn – all adults versus over-55s, March 2010 and February 2011
- In particular, prevailing low interest rates have hit savings income
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- Figure 36: Effects of the economic downturn on personal finances/wealth – over-55s only, March 2010 and February 2011
- Over-55s are less confident about their financial future than a year ago
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- Figure 37: Consumer sentiment in regards to own future financial situation – all adults versus over-55s, March 2010 and February 2011
Retirement Plans and Aspirations
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- Key points
- One in ten over-55s expect never to retire
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- Figure 38: Length of time to retirement, by age, June 2009
- Ony half of all over-55s are confident of having enough savings
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- Figure 39: Level of confidence of personal savings providing a comfortable retirement, by age, June 2010
- Around one in four over-55s would use their property to fund their retirement
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- Figure 40: Attitudes towards retirement and retirement saving, by age, June 2010
Retirement Income Sources
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- Key points
- About Mintel’s consumer survey
- Most adults are relying on the state pension to fund their retirement
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- Figure 41: Expected or actual sources used to fund retirement, February 2011
- Figure 42: Expected or actual sources used to fund retirement, February 2010 and February 2011
- Just 1% of homeowners plan to use equity release to fund their retirement
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- Figure 43: Expected or actual sources used to fund retirement, by tenure, February 2011
- Under-45s are less likely to rely on state benefits or a private pension
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- Figure 44: Expected or actual sources used to fund retirement, by age, February 2011
- Men aged 65+ are a key target group
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- Figure 45: Expected or actual sources used to fund retirement, by combined gender and age – over-45s only, February 2011
Ownership and Consideration of Equity Release
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- Key points
- 2% of outright homeowners have an equity release plan
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- Figure 46: Consideration of equity release to help fund retirement, by tenure, February 2011
- The under-35s are more open to the idea of using equity release
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- Figure 47: Consideration of equity release to help fund retirement, by age, February 2011
- Men aged 65+ are most likely to have an equity release plan
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- Figure 48: Consideration of equity release to help fund retirement, by combined gender and age – over-45s only, February 2011
Attitudes Towards Equity Release
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- Key points
- Less than a third of homeowners want their family to inherit their home
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- Figure 49: Attitudes towards equity release schemes, by tenure, February 2010 and February 2011
- Mortgage holders are more pro equity release than outright homeowners
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- Figure 50: Attitudes towards equity release schemes, by tenure, February 2011
- The under-35s are keen to know more
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- Figure 51: Attitudes towards equity release schemes, by age, February 2011
- Men are generally more pragmatic and more pro equity release
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- Figure 52: Attitudes towards equity release schemes, by combined gender and age – over-45s only, February 2011
Appendix – Report Scope and Product Definitions
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- Target market
- Lifetime mortgage
- Home reversion plan
- Tax implications
- Regulation
- SHIP
Appendix – Profile of the Target Market
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- Figure 53: Demographic profile of the target market, by age, February 2009
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Appendix – Sources of Income by Demographics
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- Figure 54: Expected or actual sources of retirement income, by demographics, February 2011
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Appendix – Consideration of ERS by Demographics
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- Figure 55: Consideration of equity release schemes, by demographics, February 2011
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Appendix – Profile of ERS Customers and Prospects
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- Figure 56: Demographic profile of existing ERS customers and potential prospects, February 2011
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