Equity release consumer safeguards must be maintained
Leading equity release experts have cautioned against removing the Safe Home Income Plans (SHIP) safeguards from equity release products. The comments follow a warning from Ernst & Young that SHIP guarantees are deterring funders from entering the sector.
In the SHIP research paper, Facing the Future: Redefining equity release to meet today’s social and economic challenges, Ernst & Young identified the SHIP guarantee of no-negative equity (NNEG) as the most negative factor in deciding to fund equity release because of the risk to the funder.
James Hillman, Ernst & Young partner, stated that the SHIP no negative equity guarantee was a barrier to firms looking to enter the market.
He added: “NNEG exposes funders to house price inflation risk and there is limited opportunity to mitigate the risk through product design. If funders are unwilling to enter the market, this will affect the ability of providers to meet consumer needs and demands.”
Simon Warhurst, Operations Director of Age Partnership, said that safeguards such as the SHIP guarantee of no-negative equity play an important role as they protect the interests of the equity release customer.
He added “Age Partnership recognise the importance of the SHIP guidelines in protecting the interests of customers at each stage of the advice process and offer a transparent, efficient and professional service that we continually seek to improve.”
Andrea Rozario, director general of SHIP, said funders of equity release must understand that the purpose of the SHIP safeguards is to protect consumers.
She added “Although the safeguards are seen as obstacle to funders from entering the market, they protect customers, and a lot of providers feel the safeguards are imperative and non-negotiable. More market information is needed for funders to be able to appreciate the risk so they can make an informed decision over entering the sector.”
Stuart Wilson, MD of Equity Advice, agreed that changing the safeguards would have a negative impact.
He added “The guidelines protect consumers and giving up the safeguards would be a serious setback as the market has spent a long time reaching a point of credibility. Without the guidelines, people may take advantage of equity release.”
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