A blow has been dealt to the UK’s flagging equity release market
with the announcement by Prudential that it is to cease writing new
business in the first quarter of 2010. One of the biggest players
in the market, the insurer has a total equity release book valued
at about £1 billion ($1.6 billion).
Andrea Rozario, director general of industry
body Safe Home Income Plans (SHIP) expressed disappointment at the
“In the current economy finding sufficient
funding is an issue that many organisations face and this shows
that equity release is not immune to these issues,” said
SHIP, which has 16 members (including
Prudential) and represents over 90 percent of industry
participants, reported that in the third quarter of 2009 new equity
release business totalled £236.2 million.
This was down a hefty 22.1 percent compared
with new business of £236.2 million the third quarter of 2008 and
continued the overall downward trend in new business evident since
the fourth quarter of 2007.
New business in the first nine months of 2009
totalled £714.5 million, down 13 percent compared with £821.6
million in the first nine months of 2008.
SHIP emphasised that despite Prudential’s
withdrawal from the market it firmly believes that equity release
in the UK has a big future. This view, at least over the medium- to
long-term, appears supported by findings by another market
participant, LV=, the trading name of mutual life insurer the
Liverpool Victoria Friendly Society.
Just-published findings of a survey conducted
by LV= reveal that 1.3 million pre-retirees in their 50s plan to
cash in their property to help fund retirement. This is despite the
hefty financial blow sustained by homeowners during the financial
crisis, which LV= noted has wiped an estimated £27,250 ($44,000)
off the value of the average over 50-year-old’s home.
Commenting on the survey’s findings, Vanessa
Owen, head of LV=’s equity release business unit, said: “Leading up
to the credit crunch, many homeowners saw their property as a
potential cash cow to aid retirement.
“But in a matter of months millions of
pre-retirees have seen both their property and pension fund values
“Despite this, their confidence in the
long-term value of bricks and mortar remains.”
Indeed, for many pre-retirees their homes may
well still be their last hope of receiving a decent pension.
Specifically, LV=’s survey revealed that 16 percent of over-50s
believe their traditional pension savings are no longer enough to
retire on and that their home is therefore the strongest pension
A further 10 percent admitted that their home
will be their only source of retirement income beyond the state