Forum Brief: Home reversion scheme

HM Treasury has announced that home reversion plans will be regulated by the Financial Services Authority (FSA).

Government Response: HM Treasury

Financial secretary Ruth Kelly said: "Buying a home reversion policy is a huge financial decision involving the most important, and sometimes only significant, asset of elderly people. It can have significant implications  for tax, benefits, inheritance and long-term financial planning. Regulation will help people to make informed choices, offer valuable consumer protection and ensure that there is a level playing field in the equity release market.

"Legislation to regulate home reversion plans will be brought forward as soon as parliamentary time allows."

Forum Response: Consumers' Association

Laurence Baxter, FSA regulation senior policy advisor, said: "This is a great day for consumers.  Consumers' Association is very pleased to see that the Treasury has realised the high risk nature of home reversion schemes, and that they should be regulated along with other types of products.

"These products, which have a complex definition, will require a careful set of regulations and we shall remain ever vigilant to ensure the rules, when they are released in the next few months, afford the fullest possible protection.

"Until home reversion schemes are regulated consumers should treat them with caution and consult regulated advisers for equity release advice."

Forum Response: Council of Mortgage Lenders

Michael Coogan, CML director general said: "The Treasury has made the right decision.  Home reversion schemes and lifetime mortgages need to operate under a comparable system of regulation as soon as possible to safeguard consumer protection.  For the industry there are benefits too, as a robust system of regulation across the board will help to underpin confidence and growth in the market for equity release."

Forum Response: National Consumer Council

Jill Johnstone, head of policy at the National Consumer Council (NCC) said:"Today’s Treasury announcement on home reversion plans is a victory for common sense.

"The government has recognised the unarguable case for all equity release plans to be sheltered under the same regulatory umbrella.

"What matters now is that the next steps towards regulation are swift and sure. Parliamentary time to introduce necessary legislation must be found without delay. The sooner the Financial Services Authority (FSA) is given responsibility for home reversion schemes the better for everyone."

Forum Response: Association of British Insurers

Chris Kenny, ABI’s head of life and pensions , said:“Today’s announcement is a victory for common sense.

“The ABI and consumer bodies have long shared the view that the complex nature of equity release products means that the current voluntary arrangements may not give consumers the necessary protection and piece of mind they are entitled to.  Consistent regulation will help create a competitive, consumer protected market that can make an important contribution to tackling the savings gap.  We are delighted that the government has listened and agreed with these arguments.”

Forum Response: Nationwide

Stuart Bernau, Nationwide's commercial and treasury director, said "We welcome the announcement by the Treasury that home reversion plans are coming under the FSA's regulatory control.  The Treasury is taking a
positive step for consumers.  Without regulation, equity release products had the potential to be a mis-selling scandal in the future, especially given that potential customers are elderly and sometimes vulnerable.  In the past Nationwide has called for all equity release products to be regulated, including home reversion schemes.

"We responded to the Treasury's consultation document by outlining our support for the introduction of regulation.  We feel the introduction of regulation will now create a level playing field for the wider equity release market.  We have always said home reversion schemes should be
regulated like any other financial product and regulations should be comparable with those for lifetime mortgages.  We await the details of the regulations, to be released shortly."