Comments On The Governments Current Proposals And Suggested Amendments

Given the limited space available, it is clearly not possible to consider much more than one age example but I think a lady of 75 is reasonably representative. However, the next table gives you a broad summary over the age range indicating who is likely to benefit from the Government's proposals and who is not, including some comments on how the suggestions I have just made would affect things. This summary assumes that income as well as long term care is provided. One general point I would make is that the plan benefits are always going to be more attractive for males because of the higher annuity rates payable and the lower long term care premiums

If we consider first the mortgage/annuity schemes. Where property values are in the £50,000/£100,000 range a higher MIRAS limit and a greater protection ratio than £1.50/£1.00 is needed; the exception is males in the lower valued properties. This scheme is not attractive for a property of £125,000 even if the MIRAS limit were raised to £60,000.

In the case of Reversion Schemes properties in the £50,000/£75,000 range are reasonable for men but only for women if they sell 70% to 75%. Properties of £100,000 and over are only attractive if 75% is sold and the £1.50/£1 ratio is raised.

In summary therefore, it will be seen with Reversion Schemes that the plans often only become attractive if 70% to 75% of the property is sold - this is due to the fact that there is less to protect and therefore the LTC policy cost is smaller. However, if someone is concerned about safeguarding their estate, would they wish to sell as much as 70% to 75% of the property?

These comments can only be general; in the end it is the client who has to decide, having regard to his or her personal circumstances, including the family situation. It may be necessary to arrange a compromise between full protection, more income and less LTC cover. One can envisage quite complex discussions in order to arrive at the most appropriate course of action.

This leads me to my final points; confidence in these schemes and regulatory control. In view of the damaging effect of the unsafe schemes in the late 1980's on the confidence of both consumers and product providers, it is my opinion that a clear cut endorsement by the Government on the concept of safe equity release is required.

In regard to regulation I believe that all equity release products should be regulated under the Financial Services Act.

Cecil Hinton FCA, Hinton and Wild (Home Plans) Ltd - independent financial advisers. Cecil Hinton is the secretary of SHIP (Safe Home Income Plans) - a company dedicated to the promotion of SAFE home income plans, participating companies are pledged to observe the SHIP code of practice which binds these companies to provide fair, simple and complete presentations of their plans.