Property Income Plan and Equity Release

Ian_W

For anyone who hasn't had chance to listen to the moneybox peice, the transcript is at (starts towards the bottom of page 6):
http://news.bbc.co.uk/1/shared/spl/hi/programmes/money_box/transcripts/money_box_04_sept_10.pdf

This quote is at the end but it perhaps reinforces the comments and concerns made by various posters on here.
Paul Lewis is interviewing David Lechmere, an actuary who is also an expert on insurance law and regulation.

LEWIS: And this scheme that’s been devised, would that give insurers capital that they could put on their books to satisfy those requirements?
LECHMERE: In my opinion, no, certainly not UK companies. Assets are allowed to be taken at market value and, as far as I can see, this scheme gives the insurance company no title to the properties and, therefore, I don’t think it has a market value to the insurer.
LEWIS: That’s what puzzled me and certainly puzzled people at the land registry, I spoke to. That the company or a special sort of middle company is taking a charge on the property; but that actually gives you no rights unless the person who’s let you have that charge defaults in some way, but they’re not gaining anything to default on.
LECHMERE: No. It’s possible that there are some other European countries where the current rules are more lax in that respect and they might be possibly be thinking of allowing this in countries other than the UK.
LEWIS: If I was to ask you in summary will this scheme work for insurance companies, what would you say?
LECHMERE: I would doubt that any UK insurance company would touch it. I can’t really comment on insurers in other countries, but I rather doubt that it would work for them either.
LEWIS: ... Well when we hear more and if anyone from Equity IQ will be interviewed, we will of course return to this story.

Maximuss, the reason to raise eyebrows about the number of new posters apparently supporting or drawing attention to this product is that it's been done several times before, often with the same people using different usernames. Pathetic really - but it does go on, if you are genuinely not that sort of salesman then please don't take it personally.

When you refer to this product in an earlier post as a "godsend" is that a professional appraisal after research /due diligence and how did you come to that conclusion given that as yet it appears no insurers are on board?

I accept I am one of your "doubting Thomas's" (you have a very biblical turn of phrase) but I have always found that financial products are best "supped with a long spoon". As an IFA (assuming you are one) did any of your clients lose money with CF Arch Cru or Keydata?

maximuss_2

Ian W. The reason I found myself on this Forum in the first place is I went on google because I wanted to find out more about The Property Income Plan as it had been discussed on money box and I have read certain comments from "Equity Release" advisers saying "be very careful regarding this product.It is not regulated and that in its self should tell you something".
I am all for being cautious when it comes to any sort of investment, savings plan or indeed anything to do with my clients hard earned money. I suspect someone in the equity release business ( which I am qualified and regulated for) this plan, if it turns out to be fit and proper for use, would mean those looking for an additional income (not a capital sum) need not sell part or all of thier home just yet and indeed if equity release is required later, the customer should get a better rate due to the increase in age. This plan could have a serious impact on that business and I am sure there are those who have a vested interest in creating doubt about this plan.
So I will repeat myself again, Let’s just wait and see what the contract looks like when it is released sometime soon. If it is suspect I won’t touch it and my mum can cancell the Med cruise.
I dont take your comments personally, of course not. People have a right to be cautious and quite rightley so. What I do object to are those who’s automatic knee jerk reaction is to rubbish anything that conflicts with thier own beliefs. After all, the world was found to be round when many said it was flat fearing that if a sailor ventured too far they would fall of the edge.
As far as the “godsend “ reference, this is not a legal or a technical term, it is just a phrase which is used everyday by so many people in a wide variety of context’s. However, if as I say , this plan turns out to be what Equity IQ claim it to be, it will be a god send. Not just for pensioners, but those who have lost their jobs and cannot now raise finance as they have no income and yes there are some out there without mortgages.Annuity rates are low, defering taking a pension for 3 or 6 years could make all the difference for some. Savings rates a poor, investment returns are not great and for some, meeting the cost of veryday living is a struggle. They have to erode thier capital now which inturn is reducing income potential for the future. So for some, to have an alternative to selling thier home, liquidising assets, going without, this plan could be a god send .
As far as due diligence is concerned, yes I have conducted as much research as I am able so far. As I have always maintained, I am looking at this plan very closely and await the draft contract.
Do Equity IQ have an Insurer on board yet? I understand that they are in close discussions with a few insurers . I imagine that they will not want to divulge too much information just yet untill they have all the necessary documentation ready for the launch of the plan.As yet it is not availbale and no one should be recommending the plan to anyone until they have the facts available. I suppose I am more fortunate than some in that I have met with the Company and seen some product documentation.
When it is launched I will, like I always do, carry out the correct detailed due diligence and make recomendations based on the clients circumstances and needs.
And finally, my clients have not lossed any money in anything I have proposed for them. Investments by nature go up and down and they understand this.I make sure they do.
I would like to say however tha t many people have invested in the buy to let market ( which by the way is unregulated) and many have done very well from it.The concept of using someone elses money to profit is tried and tested , but there are risks.Some have lost money but not because the concept is wrong. Tenants defaulting, property prices falling, being too highly geared or just not having enough working capital has seen many would be landlords lose money. The key to any scheme is having the knowledge, understanding the risks and then making a well informed decision based on your own circumstances and attitudes. No one can force you into something you dont want.

Rover35

As an IFA I have been contacted about this product and Emailed the so called KFD.

The guy selling it to me was unregulated and despite claiming to have just sold one for £500,000 admited to another colleague he hadn't been on the course yet and didn't fully understand it.

I have contacted both Aviva & Prudential as they were the companies he was quoted as using this Special Investment Vehicle. The Pru apparantly have no plans to utilise this vehicle (very polite).
Aviva has not yet replied.

THIS IS SCARY........

maximuss_2

Hi Rover 35

I am not too sure how someone could have sent you a KFD. Could it have been produced by the person concerned or has it defiinetley come from the Property Income Plan people? If he has not been on the course he would not have ssat the test and would not have signed up with Equity IQ.

With regards to Aviva and the Pru, I have not heard of a specific Company yet so that is news to me. But how confident would a potential customer be is they knew Aviva was on board?
From the information I have had, because the Insurance Companies are still in talks, no one is saying very much so I doubt that your contact ‘s at the Pru and Aviva be in a position to comment.
One final thing, there are changes taking place and this product should not be marketed until we all know the facts. Please wait and see.

Rover35

I assure you I have a KFD. It states within it they only use AA and above insurance companies (no specific companies names are mentioned). Also that the charges are held within a "Special Investment Vehicle" which will mean plenty to those of us taking and studying for our exams at present.

I hold the equity release and Advance CeMap and understand that Ship have asked people to proceed with great caution.

As to any confidence who is on board may convey. As a Special Investment Vehicle takes all the risk, so they could use it to insure high risk areas they may otherwise not become involved in.

The sooner the FSA rules on this now, as I understand they have been asked to, the sooner low and risk averse vunerable pensioners will be safe to keep a roof above their heads.

maximuss_2

Hi Rover 35.
Likewise, I to hold advanced CeMap, but this is not equity release. SHIP no doubt will advise people to proceed with caution, afterall SHIP came into existence because of people were being disadvantaged. If this plan does come to market and it does do what the company claim it will do,the advisor will need to demonstrate a need and that the product is suitable for the customer. When you refer to to "vulnerable pensioners" and "risk adverse", dont forget that there are many people out there who dont fit that profile, such as business owners, Company Directors and so on, who this plan will suit if the Commercial Product comes to market.Every customer has the opportunity to legal advice before finalising any plans in any case, which I certainley would encourage all costomers to do, just like they should when considering an Equity Release plan.Personally, I believe the FSA have failed to get it right so many times in the past that I do question their competency. The likely hood is they will choose the cautious root as they have got it wrong so many times before. Remember Northern Rock together mortgage's?
The FSA did not make sure that this plan was sold to the right customers. I came across so many young and vulnerable (vulnerable in that they were inticed by the ability to borrow more that their home was worth and the prospect of negative equity being ignored)who were sold these mortgages as a matter of course by some brokers who were also incentivised in addition to the normal procuration fees. No one form the FSA took any notice then and many of those homeowners are stuck in a property, which has not gone up in value and yet still owe more than its worth.

Rover35

Hi!

Ok you seem a level headed person who understands the market. I too regarded Northern Rock as a risk lender and was cautious in using Together products.

If this product is sold to more sophisticated clients and the risks are properly explained that's different.

However my contact with people peddling this product is it is initialy aimed at older people (as they are more likley to have no mortgage) and being represented as risk free.

Nothing I have heard or read has yet convinced me this is a valid product and if it was, as it is being represented it should be advertised on Telly 7 nights a week and trumpeted as the new miracle.

If some thing is too good to be true.......

See Northern Rock.:eek:

Doc_N

This has all gone very quiet. Has the product been quietly buried?