New over-55s loan assessed against pension income

The proposition means borrowers don't have to release equity from their house, spend savings or drawdown taxable sums from flexible pension pots.

The free2 loan allows those aged 55-70 to borrow up to £150,000 over five to twenty years. The loan is assessed against a customer’s guaranteed pension income and should they die before their loan is repaid, the debt is written off and there’s no liability to their estate.

Only those who own their own home and have spare guaranteed income will be eligible.

The product will be available online through a proprietary platform that automates large parts of the application process and utilises technology to address suitability criteria and to identify and protect potentially vulnerable customers.

free2 is also in discussion with a number of partners about the development of an intermediary programme which it plans to launch later this year.

Paul Lindsay, founder and CEO of free2, said: “We think that most financial services companies have not kept pace with the changing demands of the over-55s. We believe that people who can comfortably afford to do so should have the freedom and choice to borrow to maximise their options in retirement.

“If you’re over 55 and receiving an annuity you can’t access a lump sum from it, unlike those who retired after 2015 who enjoy pension freedoms. It’s also extremely difficult to borrow large sums of money, particularly over the long term. Our first product caters specifically for this market and is designed to help our customers finance important plans at this point in life. It is also more than likely that families will need help and support from relatives more than ever in light of Covid-19 as we move into uncertain territory.

“Our customers want security and peace of mind when considering a loan. That’s why we’ve built our business with responsibility at its core. We’re setting a new standard in customer protection that we hope will prompt others to follow suit. It’s now more important than ever to ensure customers are empowered through clear information and guidance on the suitability of financial products.”