It’s well understood that the shift from DB to DC pensions is set to leave more consumers entering later life without enough money to maintain their living standards. And with British people already holding more housing wealth than pension wealth, it’s inevitable that unlocking the value in people’s homes will be part of the solution.
But how do you move policymakers and regulators to start laying the ground for that to happen? As things stand, using property wealth in retirement is generally talked about as a last resort, rather than being a mainstream consideration for all consumers as they enter later life.
In our new independent report – supported by the Equity Release Council – we set out to do two things. Firstly, to carry out new economic analysis to bring the scale of the problem, as well as the size of the opportunity, to life.
And secondly, we wanted to understand the current social, economic, and regulatory barriers that stop more people from taking advantage of their housing wealth today – and consider what policy levers could usefully shift the dial.
Crucially, we wanted to start our research agnostic to the solutions. While our report was paid for by the Equity Release Council, we retained full editorial control, and we felt it was important to be outcomes, not product-led, as we worked through the challenge.
As a result, the first two of our recommendations are about facilitating more people to downsize in retirement. Today, one of the key blockers to people downsizing is a lack of suitable and desirable housing in the areas they want to live. The other blocker is the cost. So we have asked the government to prioritise the build of more retirement housing, as well as lower the costs of stamp duty for downsizers.
The other recommendations are about bringing housing into the heart of all retirement planning conversations. That needs to start with government services like Pension Wise and Moneyhelper providing the right tools and guidance to help customers see housing wealth as part of their core provision for retirement. Secondly, it needs the government to use public information campaigns and other levers to start changing social perceptions. We also need to see housing wealth in phase 2 of the pensions dashboard project – so that consumers can easily see all their wealth at a glance.
Our final recommendations focus on breaking down the advice silos that currently prevent housing being part of mainstream retirement planning. The FCA needs to ensure that just as equity release advisers are considering other later life lending options, mainstream mortgage advisers are also playing their part in helping consumers think about the role housing wealth may play for them as they approach retirement. We also need the wider advice community to bring housing wealth into their conversations with consumers.
If we can remove these barriers, more people will be able to enjoy the standard of living they aspire to in retirement. And there will be a positive impact on economy as well – a boost of over £20bn a year. And yes, the equity release sector will grow significantly. But that should not be what we focus on at this stage. The industry should work with policymakers, regulators and industry bodies (both within and outside of the financial services sector) to bring down all barriers to accessing housing wealth – including downsizing. This collaborative approach is far more likely to get us to the place where this industry can begin achieving its potential.
