Equity release is not perfect... but it can work

FEW products or services in the financial arena are flawless. Banks make mistakes, utility companies marvel in sending out erroneous (and incoherent) bills, while fund managers routinely fail to deliver on their pledge to beat their chosen stock market benchmark.

Even HM Revenue & Customs has big faults, failing to answer our calls – a dire situation that will not be made any easier by its decision to shut a raft of local tax offices.

The same goes for equity release plans that – through the purchase of a lifetime mortgage – allow elderly people to tap into the wealth stored up in their homes.

Such plans can be expensive, primarily because of the rollingup of interest payments into the loan. And early redemption penalties can be pernicious.

But to castigate all plans as a ripoff – as some journalists have done in the past few days – is simply wrong. Equity release is a sensible choice for many who are property rich, but cash poor. Provided quality advice is sought beforehand and the plans are used carefully – with cash drawn down in stages rather than in one go – they have merit. Indeed, competition is driving down costs and making plans more consumer friendly. Flawless? No. But there is currently no alternative – other than downsizing. Better with than without. MOLES tell me Yorkshire Building Society’s Marie Curie fixed rate bond has been so popular with savers that the mutual is about to pull up the drawbridge on the account.

Launched just over a week ago, it pays 2.25 per cent interest, fixed until the end of November 2017. Savers can either opt for monthly or annual income with the minimum investment set at £1,000.

It is an interest rate that scrutineer Savings-Champion says is bettered by just a couple of other providers (Shawbrook and RCI Bank) and then only by a tickle (2.45 and 2.35 per cent). Once the bond closes, Yorkshire promises to make a donation to Marie Curie, equivalent to 0.2 per cent of all the money deposited in the account. The charity provides care for people with terminal illness.

Although I won’t be buying the bond (stretched finances and all that) it ticks all my boxes. First, Yorkshire is one of the few ‘good guys’ in financial services with a commitment to a strong branch presence across its network (it owns building societies Barnsley, Chelsea and Norwich & Peterborough). It was also one of the few lenders to keep lending to home buyers in the dark days post 2008. It cares.

Secondly, Marie Curie is a quite extraordinary charity that through its nine hospices and battalion of nurses provides exemplary care to those coming to terms with terminal illness. It deserves our support, especially when you consider that more than 100,000 people die each year without access to the palliative care that would have eased their physical pain. The bond can be opened online or in any of the building society’s branches (irrespective of brand) and agencies. I am assured that anyone who books an appointment tomorrow to open a bond will still get one. GOOD independent financial advice cannot be bettered. That is a fact. Yet access to it is threatened like never before as a result of overzealous, bureaucratic regulation, ever rising costs (of running an adviser business) and a Financial Ombudsman Service that often treats advisers as whipping boys for all the ills in the financial world.

The result is dwindling adviser numbers and higher fees for those who want to benefit from their professional acumen. The Government is aware of the problem and has launched a review into how the financial advice market can work better. But some who represent advisers, such as Lord Deben (chair of the Association of Professional Financial Advisers), fear the review’s outcome will do little to sustain independent financial advice delivered in person by a financial adviser or planner. More likely is the encouragement of impersonal advice solutions – so called ‘robo’ advice.

Those overseeing the review – the regulator and the Treasury – are seeking opinions on what should be done to make advice more accessible.

If you use an independent financial adviser and value their professionalism, I urge you to tell those conducting the review how they have transformed your financial life.

You can do this by completing the form available at fca.org.uk/ famrresponse. If you don’t, the next time you seek out your adviser, they will not be there. They will have been replaced by a heartless and insensitive robot.

The schemes have merit – provided proper advice is sought and cash is drawn in stages