Extracts from Adam Williams May 2019
Equity release is growing rapidly. Data from the Equity Release Council, the industry lobby group, shows that £936m of property wealth was unlocked in the first three months of 2019, 8pc more than last year. Those releasing cash in a lump sum typically take £98,000 from their home.
Beware of expensive policies
Many will turn to Age UK as a trusted source of information. Since Telegraph Money began its investigation, the charity has withdrawn marketing material that failed to make clear the distinction between its charitable and commercial operations.
Kevin Dowd, a professor of finance and economics at Durham University, said there were problems with the quality of advice in the equity release industry as a whole.
“There seems to be a rather cosy relationship between Age, Hub and Just,” he said. “Age UK is using its commercial arm to make money from vulnerable people.”
When asked by this newspaper, Hub and Age UK repeatedly refused to disclose what percentage of customers ultimately took out a Just loan, citing commercial confidentiality.
Though Age earns commission of up to 0.75pc of the sum released by homeowners, it would not reveal how much money it makes from equity release in total.
However, its website boasts that it expects to raise £3m from its commercial activities, including funeral plans and insurance, this year.
Age UK said the commission from the sale of equity release was used to support charitable work. A spokesman for the charity said it had “no concern” about the percentage of customers offered a Just plan.
Taking out the wrong equity release plan can cost a customer thousands of pounds in the long run as interest charges are often compounded and unnecessary fees can be incurred.
One of the country’s leading charities has come under the spotlight for making money by referring elderly people to a commercial partner that routinely recommends equity release deals from its own parent company.
Age UK sends users through its commercial arm to an equity release advice service provided by Hub Financial. Hub is owned by Just, one of the biggest providers of equity release mortgages.
Age UK pockets commission of up to 0.75pc of the loan value from this relationship each time someone releases cash from their property. The commission from each deal can earn it thousands of pounds.
Hub customers are told that it compares a selection of deals from five providers:
Aviva
Bridgewater
Legal & General,
OneFamily
and Just.
While it makes clear that it offers only a selection of the plans sold by these firms, Telegraph Money can disclose that the way its advice process is structured means that in most cases a customer will be offered a deal by just one panel member – Just.
This raises questions about whether customers are being offered the most appropriate deal and provider. When advising customers, Hub’s staff follow a methodology that prompts them to offer Just deals for the most common consumer needs.
The only instances in which a customer will not be offered a plan from Just are for loans of less than £30,000 where the interest is paid each month, plans with variable interest rates, or other cases that the firm does not accept. Hub does not tell customers which specific loans are compared or excluded, making it