Property Income Plan and Equity Release

Penfold12

Your'e killing me!

Seriously, thanks for the opinion. Will look at font sizes, etc next month, when we refresh.

Seem to have gone off topic havent we?

Am assuming this thread has now run its course?

Debfro

Hi I am hoping someone on here may be able to help me. My FIL has just died and while looking for his funeral plan we have come across a policy with NPI which says in 2001 he sold 66% of his house for £15000 and the rest for £9000 3 years later. The house was valued at £165000. He was 73 and I am sure this cannot be right can it? Is there anything we can do? How can a company buy a £165000 for £24000? Is this legal?

sleepless_saver

Debfro wrote: »

Hi I am hoping someone on here may be able to help me. My FIL has just died and while looking for his funeral plan we have come across a policy with NPI which says in 2001 he sold 66% of his house for £15000 and the rest for £9000 3 years later. The house was valued at £165000. He was 73 and I am sure this cannot be right can it? Is there anything we can do? How can a company buy a £165000 for £24000? Is this legal?

Can't help with the question, but I suggest you start a new thread for this to get responses - this thread is about a different topic.

Debfro

could you suggest where to post it please. I haven't a clue

sleepless_saver

Debfro wrote: »

could you suggest where to post it please. I haven't a clue

You are probably on the right board, but you want to start a new thread using the new thread button on the left hand side. The button appears when you click on the board name (pensions, annuities and retirement planning).

And give your thread a name so people know what it's about.

dunstonh

Debfro wrote: »

could you suggest where to post it please. I haven't a clue

The forum you have posted this is fine but bolting your question onto someone elses thread which is unrelated to your question is not fair on the original poster (OP). It takes the thread off subject or creates two conversations going on at once.

So, start a new thread in this section (press new thread and just repeat what you have here). However, you are not going to like the answers is what your FIL did is legal. Although we can explain it further on your own thread.

Doc_N

This has all the hallmarks of smoke, mirrors and a scam. Having a charge on a property does not in any sense create an asset in the hands of an insurance company. It doesn't add in any way to their balance sheet. There's something very wrong about this, and I can already smell the burning of fingers.

Doc_N

Just a follow-up, in the interests of warning people to take great care if they're considering this product:

Unregulated equity release plan offered

The Financial Services Authority (FSA) has been made aware of the existence of an unregulated financial product.
Offered by Equity IQ, the Property Income Plan has been flagged up by the Society of Equity Release Advisers due to the fact that it is not authorised by the FSA.
The firm gets around this by claiming money from independent financial advisers in order to put them through a formal test which then 'licenses' them to sell the plan.
Simon Chalk, equity release planner at LaterLiving, commented: "Although the product may be perfectly legal and Equity IQ may argue that the plan isn't quite like a formal equity release arrangement, it will nonetheless be regarded by consumers as such so must only be considered in the same context of fully regulated products such as Home Reversion Plans and Lifetime Mortgages.
"Advisers considering selling this plan must also check that their PI insurers will cover them because it probably doesn't at present."

Daledog

There was a discussion about this on BBC Moneybox on Saturday 4 Sept you can listen to it on their podcasts if you wish.
Radio 4 I player Moneybox

dragon53

I am also signed up to this scheme as an introducer, but will only commence to market it once I am satisfied that all risks are absolutely clear. The key issue is not whether 5% return is good, bad or 'too good to be true'. The only point which needs to be clarified is the risk to the property owner. I have not yet seen the escrow agreement which provides for the release of the charge in the event of default by the insurance company, nor the licence agreement which licenses the charge to the insurance company. To a great extent, the licence is the insurance company's risk. Since [TEXT DELETED BY FORUM TEAM] and Prudential have apparently signed up to the scheme they have satisfied themselves that it will provide the required equity base. If the property charge forms part of the insurance companies equity, they circumstances under which it would be at risk need to be very clearly defined. If the company defaults on payment of the monthly interest, the charge will (we are advised) be immediately released. If the company declares itself insolvent without first defaulting on interest, this position is not yet clear. The default risk is significantly mitigated because insurance companies reinsure a significant portion of their risk. This means that risks are spread across the whole market, not concentrated in any particular company. Both of the companies are AA rated.
The problem with the scheme from a wider perspective would appear to be that it does seek to circumvent the rules which the EC are putting in place to ensure financial probity on the part of the insurance industry. If a major insurer which used the scheme did suffer catastrophic losses which were not reinsured, and the underlying assets which are supposed to support the company evaporated, this would potentially place significant strains on the system. This is not an issue for the property owner however -it is an insurance company regulatory issue.
To answer ygjeeves' points on cost to the insurance company - 1. the all-up cost is likely to be below 10%. This is actually very cheap equity. 2. If the company is able to write an additional £1million of business for every £125k of equity raised, this is very cost effective for the companies.