A new policy paper has called for a cross-sector response to make better use of housing wealth in the fight against the rising cost of living crisis.
The paper, written by Tom McPhail of the lang cat and sponsored by Responsible Life and Royal London, has called upon the government, the regulator and the financial industry to do more to help improve the standard of living among UK pensioners.
The report estimates that the UK’s retired population has a £48 billion annual shortfall in retirement incomes; a situation which is being exacerbated by the cost of living crisis in the short term and declining guaranteed incomes over the longer-term.
Tom McPhail says: “The UK has almost as much wealth in housing as it does in pensions. Over the past 20 years we’ve seen innumerable policy initiatives on pensions, while housing has been largely ignored. Politicians and the FCA have a massive blind spot when it comes to making best use of housing wealth. The FCA regulates equity release as a mortgage, rather than as an asset to draw on in retirement and advisers are free to simply ignore it if they choose and this makes no sense.
“It’s time for policymakers to recognise the huge potential in this sector to help the cost of living crisis and the levelling up agenda. They should work with the industry to help improve people’s standard of living.”
The report has called for tougher regulation of retirement advice, including more training and the requirement to disclose whether housing wealth is being considered when giving retirement income advice.
It also suggests that the £175,000 main residence inheritance tax allowance should be scrapped, amid concern it may deter some homeowners from drawing down on their housing wealth.
McPhail said: “I’d like to see a review of inheritance tax allowances and rates, including the tax treatment of people’s main residence and their pension pots too. It appears some rules actively discourage the effective use of this accumulated wealth in later life.”
Jim Boyd, CEO of the Equity Release Council, said the report’s findings highlight the need for greater focus from industry and policymakers so more of the UK’s ageing population can benefit from housing wealth.
Boyd said: “We have called for wider action to address the role of housing wealth in later life planning and many homeowners cannot afford to wait longer to remove some of the obstacles that limit the sector’s potential.
“The Council has long championed the view that, while equity release is not suitable for everyone, it should be on every homeowner’s checklist to consider in later life and can help answer some of the most pressing domestic policy challenges. We echo the call for industry and government to work together on practical solutions so housing wealth can boost retirement living standards and deliver positive outcomes across the generations.”
Will Hale, CEO of Key Later Life Finance, echoed the sentiment: “With the later life lending market currently worth circa £153 billion, there is no doubt that it can play a significant role now and in the future when it comes to meeting the pensions shortfall.
“However, this potential can only be achieved if we focus on working together in overcoming barriers such as advice silos and lack of customer awareness around the benefits of incorporating housing wealth within their financial planning. Good customer outcomes and ensuring that people are able to use all their assets to enjoy the standard of living in retirement they aspire to should be our focus.”
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