Later life lending director urges politicians to recognise pension deficit
The UK is facing a pension shortfall challenge that politicians need to acknowledge if they are to support the mortgage and housing markets, according to Kay Westgarth from Standard Life Home Finance.
Westgarth (pictured), who is sales director for the later life lender, believes there is trillions of pounds of property wealth which could be accessed by homeowners.
Standard Life Home Finance aims to help customers transform their retirement with a range of lifetime mortgages.
In the face of a cost-of-living crisis and high inflation, equity release specialists are diversifying and embracing the new opportunities which come from current market conditions, Westgarth suggested.
She is very clear about what politicians could do in this important election year.
“Acknowledge that we have a pension deficit problem in the UK,” she urged. “There is £8 trillion worth of property wealth in the UK. If we break it down, there is £1.6 trillion outstanding in mortgages, meanwhile the total value of pension funds is £3 trillion.
“Let’s be frank - the sums aren’t adding up, and our market must be vigilant if we are to meet the evolving needs of our customers. There can be no debate that housing wealth must form part of the retirement conversation. On another note, I would encourage our leaders to deliver a comprehensive social care policy - it’s a manifesto promise that has been kicked down the road several times but the importance of it cannot be underestimated.”
How is the later life lending market faring in the current economy?
Westgarth is positive, though, about the potential offered by an evolving market.
“I think the market is going through an exciting period of change,” she told Mortgage introducer. “It has opened new opportunities for us, especially with product evolution.
“The industry is still feeling the pain from the rising cost of living and high inflation rates. However, our market has evolved with more traditional equity release specialists adapting to the new conditions. They diversified their business into other areas of later-life lending, making themselves leaner and stronger.”
Those companies have taken stock and drafted plans to transform their businesses, according to Westgarth – they have invested in education and technology, while seeking support from other lenders. She believes that brokers also need to approach the market with fresh eyes.
“In this new world, advisers should avoid looking at the later life market in a siloed way,” she noted. “For equity release and RIO (retirement interest only mortgage), we instead should adopt a more holistic approach: this will allow us to offer the over 50s plans into retirement.”
Read more: Over-45s are now less wary about equity release, research suggests
What is the potential worth of the equity release market?
Westgarth stated that the equity release market had been valued at around £5 billion. Widening the definition of later-life lending, she said, would open the market to a potential market of £50 billion.
“It’s also worth noting that specialist products that enable customers to service interest can benefit the user’s wider family,” she said. “The repayments mitigate the long-term impacts of compound interest, preserving the equity that should be passed down to beneficiaries or loved ones. Of course, the new Consumer Duty prompted a radical review of how financial advice and financial products are offered to individuals aged over 50.”
A renewed focus on affordability-led discussions with clients places a greater emphasis on ensuring that customers have a sound understanding of the available options in the market, Westgarth believes.
“Advisers must consider all alternative products before making a recommendation to a customer,” she said. “When a customer can make repayments, it helps to manage their total cost of borrowing.”
Where, then, does Westgarth believe the industry will be in 12 months?
“I think we’ll see more synergy between mainstream mortgage lending and later-life lending,” she said. “Whether that’s from a sales and marketing perspective or a product perspective, it’s for us to then look at our target market and look at a wide range of products aiming to get the best possible outcome for the customer.
“New regulations have led to product evolution. Lenders have developed sourcing platforms and tech tools that will help advisers engage with these changes and offer better solutions to their customers.”
Westgarth summed up: “I think there is cause for excitement.”
