By Leo Bland Legal & General is looking to enter the home income plan (HIP) market, using the plan a...
By Leo Bland
Legal & General is looking to enter the home income plan (HIP) market, using the plan as the basis for funding long term care.
This is also a move being considered by Prudential, which has argued in the past that the only way to fund long term care was through a pension or some form of equity release.
Adrian Boulding, Legal & General's welfare strategy director, said the group is interested in launching into the equity release market but added that no product launches are imminent. He said the Royal Commission's recent report on LTC had left uncertainty about how people will fund their retirement years and that product development in this environment is difficult.
He added: 'We are biding our time on this one. I believe the matter is complicated by the recent publication of the Royal Commission report on long term care. The Commission's report has begun the debate on how people are to pay for the later years in life.'
According to Stalwart Assurance, equity release products
have only penetrated 0.5% of their potential market with the 1980s misselling scandal in equity release still tending to make people wary.
Around 10,000 retirees have HIPs and Stalwart added that the market is growing rapidly at more than 50% pa. The plans offer an assured tenancy for life and lifetime income in return for a share in a property or for the proceeds of a mortgage secured on the property. HIP sales are regulated by the FSA and current providers have been in the market for an average of 17 years.
Stalwart also believes that low pensioner incomes could be set to give the equity release market a rise in sales.
Research by the insurer suggested that the average weekly income for single people aged over 65 is £119, while it is £223 for couples. Stalwart also said that one quarter of retired households have incomes of less than £80 per week and 46% of retired households fall in the lowest quintile of national income.
The insurer added that many of those in retirement are asset rich, in terms of owning their home, despite being income poor. The UK housing stock is valued at £1,300bn and 65% of all those aged over 65 are owner occupiers. Of these, nine out of 10 have paid off their mortgages.
Stalwart said that a typical equity release customer would be a widowed male aged 74, with a property valued at £65,000 and a total income per week of £120, with £10,000 in the bank. The life office said that equity release products could be used for income to cover various expenses including leisure activities, health-related care, tax planning, and school fees.
