As the current pensions crisis continues to dominate headlines, this knowledge deficit paints a worrying picture of Britons’ understanding of retirement options. In a survey of more than 1,000 adults, eight in ten consumers did not know the age they were eligible for equity release, whilst a fifth thought that they could take out a policy from the age of just 18!
Norwich Union further probed consumers to determine their level of understanding:
Lack of Product Knowledge:
The products themselves were a mystery to consumers, with a third wrongly believing that they would have to make monthly repayments if they took out a policy. 38% did not realise that an equity release policy could affect their state benefit entitlement, whilst a further 18% thought thay they would have to sell up should their partner pass away.
Misunderstanding of Tax Implications:
The issue of tax and equity release seemed to baffle most consumers questioned. A third of respondents did not know that an equity release plan could reduce their inheritance tax liabilities, whilst a further 32% incorrectly thought that tax would be payable on the monies released from their property.
Shockingly, 17% of respondents did not realise that equity release could affect the amount they may leave to their dependents.
Product Protection Ignorance:
28% of consumers did not know that equity release products are regulated by the FSA and thought that they would have no protection if they took out a policy. A further 36% did not know that most plans meant they would be protected from negative equity in the event of a downturn in the housing market.
Information Sources:
When seeking information on equity release, almost three quarters of consumers (71%) would speak to an independent financial adviser. Two thirds (63%) would speak to their bank or building society whilst almost half (46%) would turn to the yellow pages or the Internet to find further information. 45% of consumers would seek advice from a specialist company about equity release whilst family (43%) and friends (41%) were also a port of call for many. A further 40% would choose a mortgage broker for equity release advice.
Elizabeth Boardall, Head of Marketing, Norwich Union Post Retirement Products comments: “It is worrying to find that so many people are unaware of the basics of equity release when this may be a viable option for many approaching retirement. The fact that many consumers assume it is something they can have from the age of just 18 further strengthens the case for a drive in educating the Great British public. Providers and intermediaries alike have a role to play in ensuring that consumers fully understand the products available and the options open to them.
“It is however encouraging that the majority of consumers will seek advice from a variety of sources about equity release. It is the responsibility of the adviser they consult to educate the consumer on all options available for funding their retirement.”
