In the Spotlight with Stuart Wilson, more 2 life

FR: The retirement sector has seen instrumental changes over the past 12 months – how do you see the market evolving over the next year?

There has been a seismic change in the sector of late – we have seen the introduction of pension freedoms, which has had a huge impact and will continue to do so. This will filter through to equity release as more and more retirees begin to recognise that their home is a valuable retirement asset – for many, the most valuable. We have also seen a step-change within the equity release sector with record levels of lending, likely to see us break through the £2bn barrier this year. With new funding and products entering this sector at an ever-faster pace, and with consumer demand likely to increase, I believe the equity release market and the wider retirement lending market will experience huge growth over the next 12 months and beyond.

FR: What are the biggest issues facing retirees in the current economic environment, and what should advisers be aware of when dealing with clients?

Perhaps the single biggest issue facing retirees is choice – they have never had so much choice as to how and when to access their pension funds as they do now following the introduction of pension freedoms. Ironically, the new freedoms have made it harder if anything for retirees to plan and work out the best retirement income strategy. The need for advice – specialised retirement advice – is greater than ever and it is vital that retirees seek out help in order to maximise the returns they can achieve with all of their retirement assets – their pension fund, their savings and of course their home.

We are living through uncertain times, economically speaking, with gilt and interest rates at record lows. Some clients may feel tempted to ‘chase’ higher yields in order to bridge the income gap. It is imperative that advisers ensure clients are considering all of their options before making any decisions that could have long-term effects on their financial outcome. Advisers and financial advice will remain at the heart of better consumer outcomes for those approaching or at the point of retirement, and beyond.

FR: The equity release sector is on the cusp of a breakthrough, how do you propose the industry continues to grow this sector and take it to the next level?

Perhaps our biggest issue is that of distribution. The current market is serviced by around 350-400 active advisers who account for around 80% of all sales, in a market currently worth about £2bn. For equity release to reach sales volumes of £5bn or £10bn, we will clearly need far more advisers offering specialist retirement lending advice to their clients.

The conundrum here is that we do have a latent pool of qualified advisers – some 7,000 or so – who are not yet active in the equity release space... they have taken the exam but not the next step into practising within the market itself. So, theoretically at least, distribution could increase 5-6 fold overnight.

For the market to grow and reach the next milestones of £5bn or even £10bn of annual sales, the industry needs to find a way to encourage more dialogue between advisers and consumers. We need to promote retirement lending as a possible solution so that more people are aware that it could be an option for them – and we need advisers to introduce the subject to clients in the years leading up to retirement. We need to find ways to encourage more of those 7,000+ advisers to become active. Even if individual advisers do not wish to deliver the advice themselves, they could refer clients on to specialist firms who can.

FR: How can equity release be better integrated into retirement planning, and what benefits would this bring?

The starting point has to be education of consumers, and at an earlier stage. Very often, clients only come to recognise and understand the benefits of equity release once they have retired (the average age of an equity release client is still around the 70 mark, although getting younger).

This means that equity release is sometimes a ‘distress purchase’ – bought as a last resort to resolve a particular debt issue, for example.

While the nature of equity release is rapidly changing (as are the reasons for purchase), it is important that clients start to think ahead with their retirement planning and start to consider if and how their home might become part of their retirement planning strategy, if we are to grow this market exponentially.

This needs to begin with signposting from Government sources, for example. The ‘Pension Wise’ service was set up as a result of pension freedoms to help guide retirees through their new options, but there is only a cursory mention of equity release within its documentation and website. The Government – and the regulator – are crucial to helping promote and guide more clients to recognise all of the retirement options open to them, not just the ‘traditional’ ones.

Opening up access to more information and guidance on the benefits of equity release (and dispelling some of the common myths) would be invaluable in terms of helping more clients start to plan ahead and seek out the specialist advice they need in order to secure the best possible retirement solution.

FR: How do you see the relationship between pensions and later life products evolving?

The nature of pension planning is set to change. Whereas once clients had limited options at retirement – for most it involved buying a lifetime annuity, for the wealthier few perhaps a drawdown plan or ‘cocktail’ solution using SIPPs etc – today clients have far more choice and increasingly that choice will extend to ‘eating bricks’ as well as (perhaps even instead of) eating through their pension fund.

With the pension rules changes such that it is now possible to pass on a pension fund as a lump sum to anyone you choose (and potentially tax free), the way in which people approach retirement planning will evolve. It will become more commonplace for advisers to be talking to their clients about how to use all of their assets – their pension fund, savings, investments and their home – in the most tax efficient manner in order to maximise the returns on those investments and meet the changing income needs of a client throughout their retirement years.

This in turn will fuel product innovation, as providers in both the retirement lending and the retirement income markets look to deliver new, perhaps even integrated solutions that can help deliver a more holistic advice recommendation. We have already seen such innovation in this space, with the development of fixed term income plans, for example, that bridge the gap between traditional lifetime annuities and flexi-access drawdown. Further innovation in this space is inevitable as the market continues to evolve and consumer demand for bespoke ‘later life’ solutions increases.

FR: If you could see one headline about retirement in 2016, what would it be?

I would like to see a positive headline that supports and promotes the benefits of equity release, backed by the key stakeholders in this industry – lenders, advisers, the ERC, CML, the FCA – so that retirement lending finally takes its rightful place on the retirement planning stage. Equity release is all about offering more options to clients – it has the ability to transform the lives of clients overnight in a way that arguably only an unlikely lottery win or unexpected inheritance could do otherwise. If that isn’t the most positive financial services headline of 2016, I don’t know what is!