Take care with unregulated equity release plans, urges Simon Chalk

A new product aimed at homeowners looking to release equity in their homes has been launched by Equity IQ. However, Simon Chalk from equity release service LaterLiving points out that the new plan is not currently approved by the Financial Services Authority (FSA).

“The property income plan appears to offer benefits to the homeowner who may be deterred from taking a traditional form of regulated equity release, such as a home reversion plan or lifetime mortgage,” he says. “I understand from my industry colleagues that Equity IQ claim to have 350 IFAs paying £49 monthly to be ‘licensed’ to sell the plan, having sat a formal test. The plan circumvents the regulations meaning that the provider isn’t FSA-authorised therefore neither is the product or the sales process.

According to Mr Chalk, the provider appears to be taking some “cautious steps” in using authorised IFAs and mortgage advisers to sell the plan, but he says he is “extremely concerned” about the risks homeowners face at the hands of advisers who lack the “requisite skills, knowledge and qualifications of an equity release professional”.

“Although the product may be perfectly legal and Equity IQ may argue that the plan isn’t quite like a formal equity release arrangement, it will nonetheless be regarded by consumers as such so must only be considered in the same context of fully regulated products such as home reversion plans and lifetime mortgages,” he explains. “Advisers considering selling this plan must also check that their PI [professional indemnity] insurers will cover them because it probably doesn’t at present.

“The FSA having been made aware of the plan’s existence and holding Equity IQ’s marketing material have been asked to issue a statement and guidance to authorised firms. Until then I urge advisers to tread cautiously and stick to considered best practice in equity release advice.”