How is equity release regulated?

How you are protected when taking out equity release

You have the reassurance of considerable consumer protection when taking out an equity release plan. From your initial conversations with an adviser through every step of the process, regulation is there to provide safeguards.

This is welcome news because choosing equity release is an important decision. It needs to be taken only when you are fully aware of the pros and cons of equity release. Due to the consumer protection in place, you can be confident of being able to make a fully informed decision.

We hope this guide to equity release regulation and standards will be of interest and help if you are considering equity release as a way to raise retirement income or extra finance before retirement. We can also arrange professional regulated advice: call us on 0808 178 3055 or request a call back and we can book a no-obligation appointment with one of our selected FCA-regulated equity release advisers.

FCA equity release regulation

Anyone offering you advice on equity release, or providing you with an equity release product, must be regulated by the Financial Conduct Authority, usually known as the FCA. Equity release is one of many financial markets supervised by them, as they are the UK’s financial services regulator and watchdog.

This means that equity release brokers, advisers and lenders are required to follow strict rules and codes of conduct when providing you with information, advice or equity release products.

For example, the FCA Handbook lists extensive standards for advisers and equity release providers. The focus of these FCA equity standards is on ensuring that consumers take out an equity release plan that is suitable for their needs and circumstances. Some specific requirements include considering:

• Whether the benefits to the customer outweigh any adverse effect on their tax position or their entitlement to means tested benefits
• Whether alternative methods of raising the required funds would be more suitable
• The customer’s preferences for their estate, including whether leaving an inheritance is important to them 
• The customer’s future plans and needs, such as whether they are likely to move house in the future 

When the team here at Equity Release Wise arranges appointments for our customers, we only do so with selected FCA-regulated equity release advisers who are required to comply with FCA equity release standards. To talk to one of these regulated advisers, please call 0808 178 3055 or request a call back.

The Equity Release Council

For more than 30 years, the Equity Release Council has been the UK’s industry body setting standards to protect consumers. It is strongly recommended you only deal with advisers who are Equity Release Council members, such as our selected advisers, as they commit to following the organisation’s code of conduct and standards.

By signing up to the Equity Release Council rules and standards, advisers and providers commit to giving you ‘fair, simple and complete’ information about your equity release plan. This should include all the costs involved, tax implications, what will happen if you move to another property, and how changes in property values may affect your plan.

Other standards followed by Equity Release Council members include:

• Your right to live in your property for life or until moving into permanent residential long-term care
• You can move your plan to another property as long as it meets the lender’s criteria
• The ‘no negative equity’ guarantee
• The right to make voluntary, penalty-free partial loan repayments
• For a lifetime mortgage, interest rates must be fixed or if they are variable they should be capped at an upper limit
• You can choose your own solicitor and not be tied to one recommended by an adviser

Furthermore, Equity Release Council members are required to follow certain principles and outcomes. For example, advisers should offer their customers products and services that best suit their needs and that are fairly priced. Advisers should also seek to identify and provide appropriate support to customers who may be exposed to physical, mental and financial vulnerability.

What if I have a complaint about the service I receive?

The Financial Conduct Authority insists that the businesses it regulates have procedures in place for resolving disputes with their customers. They also say that complaints have to be acknowledged promptly and resolved as soon as possible and within eight weeks at the latest.

The FCA provides useful ‘How to complain’ information. If you follow this guidance and complain to a firm and are not happy with their response, you can contact the Financial Ombudsman Service to take things further.

Further protection from the Financial Services Compensation Scheme

You have additional protection should things go wrong, thanks to the Financial Services Compensation Scheme (FSCS).

This means you could claim compensation if you lost money because, for example, you were advised to take out a lifetime mortgage that was unsuitable for you at the time and the broker or adviser you dealt with has failed. The FSCS also offers protection specific to equity release customers who lose money due to:

• Advice to take out a lifetime mortgage that was unsuitable (for advice given after 31 October 2004) 
• Bad advice about home reversion plans (since 6 April 2007)