The findings of a recent 'snap poll' on the Equity Release
Council's website have revealed some rather worrying results.
Despite significant media coverage, the majority of people (82%)
said they felt that consumers were not aware of how the Social Care
White Paper will impact on the amount they will need to pay for
care. In addition, the remaining 18% of those who responded said
that they felt consumers were only aware of the White Paper's
implications in a "general way".
When asked how much they thought a year in a care home might
cost, 34% of respondents believed it would be within the region of
£20,001-£30,000, and over half (51%) thought it would cost over
£30,001. Only a relatively small percentage underestimated the cost
of care, selecting figures below £20,000.
And when pushed to answer 'who will fund care if a person needs
it in later life', under a third (29%) felt that individuals would
be responsible for this cost, with nearly two-thirds (62%)
believing it would be funded by a combination of the state and the
The results of these online polls suggest that consumers are
still not fully appreciating their responsibility in preparing for
In our own survey last year in response to the report which
preceded this Paper, ERSA found that when faced with paying for
long-term residential care in retirement, 22% were planning to use
their savings and a further 16% hoped to pay for it out of their
pension. 11% said they were planning to use equity release for this
- although this figure rose dramatically to 68% of those aged over
66, suggesting that as people get older they develop a more
realistic attitude towards the cost of retirement.
Thirty-two per cent of people who answered ERSA's survey said
that a Government stamp of approval for equity release would make a
positive difference to the likelihood of them taking out an equity
release product in the future. It would be interesting to see how
this has changed since then as there have been several significant
developments in the equity release market over the last year.
In May this year, the Equity Release Council (the Council) was
launched, of which ERSA is a member. The Council is an industry
body intended to act as a united voice for all those who work in
the equity release sector, including providers, qualified financial
advisors, lawyers, intermediaries and surveyors. Last month, the
Council announced the formation of its Advisory Board, which
includes several senior politicians. Their involvement in the
Council demonstrates that not only has equity release climbed up
the Government's agenda but also that the view of equity release is
changing for the better.
One of the unfortunate factors of living longer is the increased
likelihood of needing to pay for long-term care costs. The State
simply cannot afford to pay for this potentially huge bill alone
and if people have built up a certain amount in assets - especially
in their home - it is sensible to expect them to pay towards the
costs. But it is also sensible to cap how much people will have to
pay and what the Government decides to do next will be crucial.
Equity release has always had a role to play here. In the first
instance, it often allows people to stay in their own homes for
longer and to pay for care there but it also has a major role to
play with paying for residential care costs too. It certainly
appears that the Government's views towards equity release are
changing, illustrated in their support and involvement with the
Equity Release Council. It will be very interesting to see how this
shift impacts the views and behaviour of the public.