Table of Contents
Introduction
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- Abbreviations
Executive Summary
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- The market
- Equity release sales expected to turn the corner in 2012
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- Figure 1: Forecast of new equity release sales, by volume, 2006-16
- Drawdown plans account for a growing share, but home reversion sales have fallen
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- Figure 2: Volume of new equity release sales, by product type, 2007-11
- Market factors
- Demographic trends should result in significant market growth
- Improving perceptions
- Market awaits a government decision on long-term care proposals
- Companies, brands and innovation
- Top three providers dominate the market, but competition is increasing
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- Figure 3: Equity release provider share, by new sales value, 2011
- Interest-only and enhanced equity release products are main areas for innovation
- Equity release adspend continues to decline
- The consumer
- State pension dominates retirement planning expectations
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- Figure 4: Expected and actual sources of retirement income, March 2012
- Consumers are fairly confident about their retirement finances
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- Figure 5: Expectations of retirement finances, March 2012
- Consumers still need still to be convinced about the merits of equity release schemes
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- Figure 6: Attitudes towards equity release schemes, March 2012
- Inheritance issues still present a major barrier to equity release
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- Figure 7: Attitudes towards inheritance and property in retirement, March 2012
- What we think
Issues in the Market
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- Can the market recover from the recent decline in sales?
- To what extent are people confident about their finances in retirement?
- Are attitudes towards equity release products changing?
- To what extent is protecting inheritance a barrier to equity release?
- What appetite is there for downsizing in retirement?
Future Opportunities
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- Equity release could unlock a more fulfilling retirement
- Encouraging a more selfish approach to retirement
Market Environment
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- Key points
- Equity release expansion is widely expected due to demographic trends
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- Figure 8: UK population, by age, 2010-35 (2010-based projection)
- Longer life expectancy places pressure on retirement savings
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- Figure 9: Expectation of life at age 55, by gender – UK, 1981-2060
- More retirees are taking debt into retirement
- Equity release market still has to win over some consumers and advisers
- SHIP extends membership to include financial advisers
- Retirees have property wealth of around £750 billion
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- Figure 10: Tenure, by age of household reference person – England, 2010-11
- House price volatility undermines appetite for equity release schemes
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- Figure 11: UK average house prices – former owner-occupiers (not seasonally adjusted), Q1 2000-Q3 2011
- Over-65s are less optimistic about future house price growth
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- Figure 12: Consumer expectations of house prices, by age, December 2011
- Competitive rates return to the equity release market
- A last resort or a useful retirement planning tool?
- Dilnot Commission proposes to cap long-term care costs
- Decision over long-term care costs is crucial to equity release market
- MMR proposals to ensure all equity release sales are advised
- RDR could boost equity release sector
Competitive Context
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- Key points
- Significant gap in private pension participation
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- Figure 13: Pension and investment product ownership, by age, June 2011
- Downsizing offers a different way to release equity…
- …but is not suitable for all
- Sale-and-rent-back market is closed by FSA
SWOT Analysis
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- Figure 14: Equity release schemes, SWOT analysis, 2012
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Who’s Innovating?
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- Key points
- New sector emerges with development of interest-only products
- Stonehaven and AToM offer interest-only deals
- Hodge Lifetime offers lifetime mortgage with overpayment facility
- Greater focus on enhanced equity release products
- Established providers adopt more flexible features
Market Size and Forecast
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- Key points
- SHIP figures show a further decline in equity release sales in 2011
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- Figure 15: Volume and value of new equity release plan sales, 2005-11
- Drawdown products place downward pressure on sales value figures
- Key Retirement Solutions data reflect wider market developments
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- Figure 16: Volume and value of new equity release plan sales, SHIP and Key Retirement Solutions, 2009-11
- Market Forecast
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- Figure 17: Forecast of new equity release sales, by volume, 2006-16
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- Figure 18: Forecast of new equity release sales, by volume, 2006-16
- Figure 19: Forecast of new equity release sales, by value, 2006-16
- Figure 20: Forecast of new equity release sales, by value, 2006-16
- Forecast methodology
- Fan chart explanation
Market Segmentation
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- Key points
- Drawdown products account for 61% of sales
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- Figure 21: Value of new equity release sales, by product type, 2011
- Home reversion sales continue to decline
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- Figure 22: Volume of new equity release sales, by product type, 2007-11
- Home reversion schemes lack adviser support
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- Figure 23: Volume of new equity release plan sales, by type, 2007-11
- Home reversions account for 2% of market in value terms
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- Figure 24: Value of new equity release plan sales, by type, 2007-11
Regional and Usage Trends
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- Key points
- Wales and East Anglia record highest levels of growth in 2011
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- Figure 25: Volume and value of equity release schemes, average LTV and average customer age, by region, 2011
- Under-75s are more likely to use equity release schemes
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- Figure 26: Distribution of equity release schemes, by age, 2011
- Home improvements remain the main reason to release equity
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- Figure 27: Popular uses of equity release, 2009-11
- A growing number release equity to help family and friends
Market Share
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- Key points
- Top three providers account for 84% of sales value…
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- Figure 28: Top three equity release providers, by new sales value, 2009-11
- …but competition from other providers is increasing
Companies and Products
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- Aviva
- Just Retirement
- LV=
- Key Retirement Solutions
Brand Communication and Promotion
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- Key points
- Equity release adspend continues to decline
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- Figure 29: Total advertising expenditure on equity releases schemes, 2007/08-2011/12
- Aviva dominates equity release adspend
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- Figure 30: Top 15 advertisers of equity releases schemes, 2009/10-2011/12
- Direct mail used to target equity release advertising
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- Figure 31: Adspend on equity releases schemes, by media type, 2009/10-2011/12
Channels to Market
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- Key points
- Intermediary share rises to almost 90% of sales volume
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- Figure 32: Share of equity release sales (volume), by distribution channel, 2006-11
- Vast majority of equity release sales are made on an advised basis
- MMR will make advised sales compulsory
- Advisers discouraged by negative connotations
- Efforts to boost adviser participation
- SHIP extends membership to advisers
The Retired Population – Financial Situation and Prospects
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- Key points
- Retirees are in a much better financial position than most...
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- Figure 33: Current financial situation – all adults and retirees, March 2012
- ...but the last 12 months have been challenging
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- Figure 34: Financial situation compared to a year ago – all adults and retirees, March 2012
- A third of retirees are pretty confident about the future
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- Figure 35: Consumer sentiment for the coming year – all adults and over-55s, March 2012
- Retirees are more likely to spend extra cash on holidays
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- Figure 36: What any extra money is spent on – all adults and retirees, March 2012
Sources of Retirement Income
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- Key points
- Most people expect to rely on pensions to fund retirement
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- Figure 37: Expected and actual sources of retirement income – all adults, over-45s and retirees, March 2012
- Very little appetite for using property to fund retirement
- Equity release still not seen as a mainstream retirement planning tool
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- Figure 38: Expected or actual sources of retirement income, 2010-12
- A fifth expect to rely on one source of retirement income
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- Figure 39: Repertoire of expected sources of retirement income, March 2012
- Only most active retirement planners expect to use property to provide income
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- Figure 40: Expected sources of retirement income, by repertoire of expected sources of retirement income, March 2012
Confidence About Retirement Finances
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- Key points
- Over-45s are fairly confident about their retirement finances…
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- Figure 41: Expectations of retirement finances, March 2012
- …although more than a third do have some concerns
- Confidence about retirement finances increases with age
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- Figure 42: Expectations of retirement finances, by age, March 2012
- Retirement finance expectations are affected by mortgage debt
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- Figure 43: Expectations of retirement finances, by socio-economic group and housing tenure, March 2012
- Mortgage debt in retirement is a growing problem
- Confidence increases with higher product ownership
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- Figure 44: Expectations of retirement finances, by repertoire of expected sources of retirement income, March 2012
Attitudes Towards Equity Release Schemes
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- Key points
- The majority of over-45s still need to be convinced about equity release…
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- Figure 45: Attitudes towards equity release schemes, March 2012
- …but there are some positive signs
- Repositioning equity release products could increase appeal
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- Figure 46: Attitudes towards equity release schemes, by expectations of retirement finances, March 2012
- Over-65s are the least likely to consider equity release schemes
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- Figure 47: Attitudes towards equity release schemes, by age, March 2012
- Mortgage holders are more likely to consider equity release schemes
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- Figure 48: Attitudes towards equity release schemes, by socio-economic group and housing tenure, March 2012
- More engaged retirement planners only see equity release as a last resort
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- Figure 49: Attitudes towards equity release schemes, by repertoire of expected sources of retirement income, March 2012
Attitudes Towards Inheritance and Property in Retirement
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- Key points
- Attitudes towards inheritance undermine appetite for equity release
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- Figure 50: Attitudes towards inheritance and property in retirement, March 2012
- Almost a third hope to remain in their home for life
- Even the least prepared for retirement want family to inherit their property
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- Figure 51: Attitudes towards inheritance and property in retirement, by repertoire of expected sources of retirement income, March 2012
- Consideration of downsizing is driven by confidence in retirement finances
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- Figure 52: Attitudes towards inheritance and property in retirement, by expectations of retirement finances, March 2012
- Some scope to target those who want to enjoy their retirement
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- Figure 53: Attitudes towards equity release schemes, by most popular attitudes towards inheritance and property in retirement, March 2012
Appendix – Product Definitions and Market Background
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- Target market
- Lifetime mortgage
- Home reversion plan
- Tax implications
- Regulation
- SHIP
Appendix – Market Forecast
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- Figure 54: Market forecast – best and worst case scenario, by volume, 2011-16
- Figure 55: Market forecast – best and worst case scenario, by value, 2011-16
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Appendix – Sources of Retirement Income
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- Figure 56: Expected sources of retirement income, by demographics, March 2012
- Figure 57: Expected sources of retirement income continued, by demographics, March 2012
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- Figure 58: Expected sources of retirement income continued, by demographics, March 2012
- Figure 59: Repertoire of expected sources of retirement income, by demographics, March 2012
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Appendix – Confidence About Retirement Finances
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- Figure 60: Expectations of retirement finances, by demographics, March 2012
- Figure 61: Expectations of retirement finances continued, by demographics, March 2012
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Appendix – Attitudes Towards Equity Release Schemes
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- Figure 62: Attitudes towards equity release schemes, by demographics, March 2012
- Figure 63: Attitudes towards equity release schemes continued, by demographics, March 2012
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Appendix – Attitudes Towards Inheritance and Property in Retirement
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- Figure 64: Attitudes towards inheritance and property in retirement, by demographics, March 2012
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