Table of Contents
Executive Summary
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- The market
- Standard model predicts solid growth
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- Figure 1: Forecast of new equity release advances, at current prices – fan chart, 2008-18
- Drawdown lifetime mortgages are the preferred choice
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- Figure 2: Proportional distribution of new equity release sales, by product type, 2009-13
- Customer motivation and characteristics
- Market factors
- Ageing population increases demand for equity release
- The effect of house price inflation
- Lower borrowing costs have increased the attraction of lifetime mortgages
- Regulatory impact
- Companies, brands and innovation
- Two brands dominate
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- Figure 3: Market shares of the top three equity release providers, by value of new sales, 2010-13
- Market innovation
- Brand reinforcement
- Most new business is generated through qualified intermediaries
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- Figure 4: Share of equity release sales (volume), by distribution channel, 2007-13
- The consumer
- Sources of retirement income
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- Figure 5: Expected or actual sources of retirement income, February 2014
- Financial situation in retirement
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- Figure 6: Expected or actual financial situation in retirement, February 2014
- Awareness and understanding of equity release
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- Figure 7: Awareness of different aspects of equity release products, February 2014
- Product penetration and consideration
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- Figure 8: Take-up and consideration of equity release, February 2014
- Attitudes toward equity release and related issues
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- Figure 9: Agreement with attitudinal statements about equity release, February 2014
- What we think
Issues and Insights
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- Changing attitudes about property wealth
- The facts
- The implications
- Interest-only mortgage borrowers with a short-fall at maturity represent an opportunity for equity release providers
- The facts
- The implications
- Borrowing into retirement set to increase
- The facts
- The implications
Trend Application
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- Trend: Without a Care
- Trend: Return to the Experts
- Mintel futures: Old Gold
Market Drivers
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- Key points
- Ageing population expands target market for equity release
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- Figure 10: UK population, by age, 2014-34 (2012-based projection)
- Increasing longevity stretches the length of time in retirement
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- Figure 11: Period expectation of life at age 55, by gender – UK, 1981-2058
- Around three in four over-65s are homeowners
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- Figure 12: Tenure, by age of household reference person – England, 2011/12
- UK house prices have more than doubled over the past two decades
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- Figure 13: UK average annual house prices – former owner-occupiers (not seasonally adjusted), 1994-2013
- Home reversion plans lose more ground to lifetime mortgages
- Interest rates on lifetime mortgages reflect the additional guarantees
- Lower rates may be generating greater interest in remortgage activity
- Many people are motivated to release equity to enhance their lifestyle
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- Figure 14: Most popular uses of equity release, 2013
- Increased focused on clearing debts in 2014
- The average customer is aged 69
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- Figure 15: Distribution of equity release schemes, by age of customer, 2013
- Gender divide
Regulatory Issues
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- Key points
- Equity Release Council establishes industry government forum
- MMR prohibits non-advised equity release sales
- Changes to the pension rules offer new opportunities for equity release
- Cap on care costs doesn’t go far enough
- Deferred payment scheme may be means-tested
- Changes to IHT rules have reduced need for tax mitigation
- Welfare reform will make it easier to judge the impact of equity release on state benefits
Market SWOT Analysis
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- Figure 16: The equity release scheme market– SWOT analysis, 2014
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Who’s Innovating?
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- Key points
- Hodge Lifetime targets interest-only borrowers who lack a repayment strategy
- Stonehaven positions itself to capitalise on the arrival of new entrants
- Pure Retirement – a new brand in the equity release arena
- Age Partnership diversifies into the face-to-face advice market
- Newlife wins FCA approval for administration permissions…
- …and launches a new lump-sum lifetime mortgage product
- more 2 life launches online affordability tool and MMR support for advisers
Market Size and Forecast
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- Key points
- A small market with good growth potential
- Market continues to recover at a respectable pace
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- Figure 17: Sales of equity release schemes, 2007-13
- Steady volume growth forecast
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- Figure 18: Forecast of the volume of new equity release scheme sales – fan chart, 2008-18
- House price inflation is expected to underpin strong growth in new advances
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- Figure 19: Forecast of new equity release advances, at current prices – fan chart, 2008-18
- Figure 20: Forecast of equity release schemes, at current and constant prices, 2013-18
- Forecast methodology
- Fan chart explanation
Market Segmentation
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- Key points
- Drawdown remains the most popular equity release product
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- Figure 21: Proportional distribution of new equity release sales, by product type, 2009-13
- Lump-sum mortgage customers tend to borrow more than those opting for drawdown
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- Figure 22: Average amount released, by product type, 2011-13
- On average, customers release less than a quarter of their housing wealth
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- Figure 23: Proportion of home equity released and proportion that is inheritance-protected, by product type, 2011-13
- Equity release customers tend to be further up the property ladder
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- Figure 24: Average value of property owned by equity release customers versus national average house price, 2011-13
Market Share
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- Key points
- Just Retirement closes the gap between itself and the market leader
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- Figure 25: Top three equity release providers, by value of new sales, 2010-13
- Scope for more providers to emerge
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 down 27% over 12 months to February 2014
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- Figure 26: Total advertising expenditure on equity releases schemes, 2010-14
- Aviva scales back its equity release advertising
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- Figure 27: Top five advertisers of equity releases schemes, 2010-14
- Direct mail accounts for the largest share of industry adspend
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- Figure 28: Adspend on equity releases schemes, by media type, 2010-14
- A note on adspend
Channels to Market
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- Key points
- Intermediaries play an increasingly vital role in the market
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- Figure 29: Share of equity release sales (volume), by distribution channel, 2007-13
- Who are the leading intermediaries and what do they charge?
- Providers continue to seek more advisers to enter the market
Retirement Income Sources
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- Key points
- Survey background
- Many over-45s have a private pension or savings to support them in retirement, but is this enough?
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- Figure 30: Expected or actual sources of retirement income, by tenure, February 2014
- One in nine 45-54-year-olds expect to receive a family inheritance to help fund their retirement
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- Figure 31: Expected or actual sources of retirement income, by age, February 2014
- Men are better prepared for retirement
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- Figure 32: Expected or actual sources of retirement income, by combined gender and age, February 2014
Financial Situation in Retirement
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- Key points
- Less than two thirds of over-45s predict, or are already enjoying, a comfortable retirement
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- Figure 33: Expected or actual financial situation in retirement, February 2014
- One in ten mortgage holders aged 45+ expect to struggle to make ends meet in retirement
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- Figure 34: Expected or actual financial situation in retirement, by tenure, February 2014
- 7% of mortgage holders expect their mortgage terms to extend into retirement
- Today’s 45-64-year-olds are less confident of having a comfortable retirement than the over-65s
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- Figure 35: Expected or actual financial situation in retirement, by age, February 2014
- Most over-45s appear unconcerned about meeting potential future care costs
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- Figure 36: Expected or actual financial situation in retirement, by combined gender and age, February 2014
- Retirement income provision influences financial outlook
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- Figure 37: Expected or actual financial situation in retirement, by expected or actual sources of income, February 2014
Product Awareness
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- Key points
- Scope to improve consumer awareness and understanding of equity release
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- Figure 38: Awareness of different aspects of equity release, by tenure, February 2014
- Very low awareness among the over-75s
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- Figure 39: Awareness of different aspects of equity release, by age, February 2014
Take-up and Consideration
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- Key points
- Around 3% of over-55s have an equity release plan
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- Figure 40: Take-up and consideration of equity release, by tenure, February 2014
- 45-64-year-olds show the greatest interest in equity release
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- Figure 41: Take-up and consideration of equity release, by age, February 2014
- Women are more likely to consider it, while men are marginally more likely to have it
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- Figure 42: Take-up and consideration of equity release, by combined gender and age, February 2014
- Equity release can apply to those with their own pension
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- Figure 43: Take-up and consideration of equity release, by expected or actual sources of retirement income, February 2014
- People expecting to struggle in retirement are more likely to consider an equity release plan
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- Figure 44: Take-up and consideration of equity release, by expected or actual financial situation in retirement, February 2014
Attitudes toward Equity Release
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- Key points
- Only 37% of homeowners aged 45+ want to leave their home to loved ones
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- Figure 45: Agreement with attitudinal statements about equity release, by tenure, February 2014
- Mortgage holders are more pro-equity release than outright homeowners
- Appetite for downsizing declines the longer people have been retired
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- Figure 46: Agreement with attitudinal statements about equity release, by age, February 2014
Appendix – Equity Release Products Explained
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- What is equity release?
- Lifetime mortgages
- Home reversion plans
- Tax implications
- Industry regulation
Appendix – Market Size and Forecast
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- Forecast summary
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- Figure 47: Forecast of new equity release sales, at current prices, 2008-18
- Volume of new sales – best- and worst-case scenarios
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- Figure 48: Forecast of equity release volume sales – best- and worst-case scenarios, 2013-18
- Value of new advances – best- and worst-case scenarios
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- Figure 49: Forecast of equity release advances – best- and worst-case scenarios, at current prices, 2013-18
- Forecast methodology
Appendix – Retirement Income Sources
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- Figure 50: Expected or actual retirement income sources (top seven), by demographics, February 2014
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Appendix – Financial Situation in Retirement
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- Figure 51: Expected or actual financial situation in retirement, by demographics, February 2014
- Figure 52: Expected or actual other related situations in retirement, by demographics, February 2014
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Appendix – Product Awareness
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- Figure 53: Awareness of different aspects of equity release (top five responses), by demographics, February 2014
- Figure 54: Awareness of different aspects of equity release (lowest four responses), by demographics, February 2014
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Appendix – Take-up and Consideration
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- Figure 55: Consideration and ownership of equity release schemes, by demographics, February 2014
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Appendix – Attitudes toward Equity Release
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- Figure 56: Agreement with attitudinal statements about equity release (top five responses), by demographics, February 2014
- Figure 57: Agreement with attitudinal statements about equity release (lowest five responses), by demographics, February 2014
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