Budget fact sheets 2005 - senior citizens - funding for the development of a code of practice for home equity release schemes

The Government is to develop a code of practice for home equity release schemes.

These insurance-type schemes release the equity older people have in their home in a way that the equity can be used to enhance older people’s lifestyles. They are designed to release the capital locked into a home property in the form of an annuity, lump sum or periodic payment.

Most older people own their own home, the vast majority without a mortgage. Consequently the money they have tied up in their home is a major aspect of their net wealth.

Older people are concerned about making use of the equity in their homes in a way that enables them to supplement their fixed income but they lack confidence in the schemes. They are very wary of the financial consequences of taking what amounts to a reverse mortgage.

It is proposed that a code of practice be developed and applied to home equity release schemes. Such a code will provide older people who are considering utilising home equity schemes with a level of protection for their financial interests. It will also give them confidence when looking at a wider range of options for enhancing their lifestyle.

Where these schemes exist overseas it is common practice to have regulatory controls.

The development of the code of practice will be led by the Minister for Senior Citizens with the work undertaken by the Office for Senior Citizens. The code of practice will be negotiated with the insurance industry and cover issues such as disclosure of terms and conditions, risk management practices and recoveries.

The code will not seek to promote or endorse home equity schemes, rather it will seek to provide a regulatory environment. This work will be funded out of existing baselines.