The FCA’s director of retail banking has called for the industry to ‘step forward’ in promoting later life lending to support retirement planning.
Speaking at the Later Life Lending Summit yesterday (16 June), Emad Aladhal said there is an increasing generational and social need to provide greater funding in retirement, and later life lending has the potential to become the fourth pillar in retirement, alongside the state pension, workplace pensions, and personal pensions.
“Too many people are heading towards retirement without the income they will need to maintain their standard of living,” Aladhal said.
“In the years ahead, housing wealth will become an increasing part of how many people provide for their retirement. But it continues to be seen as an option of last resort, if thought about at all.”
However, Aladhal added later life lending is more than plugging a retirement income gap.
“For some, it can fund improvements that allow them to comfortably remain in their own home or meet care needs. For others, it is a strategic choice to manage their estate, or gift to their family.”
He cited Fairer Finance research that suggests that by 2040, 51% of households aged 60 and over could benefit from accessing their housing wealth in retirement through later life lending and estimates that these consumers will hold around £4.3trn in housing wealth.
Aladhal added there are opportunities to respond to future demand by developing products people need, improving access to advice, and building trust.
“We are already making changes,” he said. “We are consulting on retirement interest-only affordability, because we believe this product could play a larger role.
“And we are conducting our focused market study on the later life mortgage market. To examine whether change is needed to enable this sector to meet consumers’ changing needs, driven by effective competition.”
