FCA Restricted FCA Restricted Ageing Population and Financial Services Equity Release Council AGM, 28 th April 2016 Linda Woodall, Director of Life Insurance and Financial Advice and Ageing Population Project Sponsor 1
FCA Restricted Our ageing population Between 2016 & Globally, those aged 1 in 3 babies born 2061, age-related 65+ will outnumber today expected to spending is celebrate their 100 th children under 5 by projected to increase birthday 2050 by 5% of GDP People aged 85+ There are now more represent the fastest people in the UK 11.4m people aged 65+ in the UK growing population aged 60+ than there segment are under 18 2
FCA Restricted What types of issues have we found? “ Access to products & services can be a “Day -to-day, older people tend to rely less on fluid intelligence – problem: older people are less likely to be digitally included – although this is reasoned, deliberative thinking & changing rapidly” more on gut-feel, intuition, rules of thumb and shortcuts ” Sue Lewis, Financial Services Consumer Behavioural Architects Panel “We should be aware that retirement decisions are unlikely in the future to be one-off ” “Few advisors cover residential & lifetime Nigel Keohane, SMF mortgages & investment advice. Advice is “There may well be a role for lenders, insurers segmented , due to and/or pension providers to get together to different regulatory design the retirement mortgages of the regimes” future .” June Deasy, CML Paul Broadhead, BSA 3
FCA Restricted FCA Ageing Population Project Discussion Paper, Roundtables and Inputs from other FCA work (e.g. FAMR, inputs from external parties Pensions) Strategy on Ageing (expected Q2 2017) For others For the FCA Working with Supervision / Working with More research / industry / Firm Government investigation consumer groups engagement Experts collaborating to deliver Policy Internal Workstreams solutions of mutual benefit work (e.g. Equality impact) We launched our Discussion Paper on 22 nd February, and the consultation window closed on the 15 th April. We are currently reviewing responses, alongside evidence and literature, regarding issues relating to older consumers. We welcome your thoughts on our work and potential areas for us to prioritise. In the meantime, please get in touch with us if you have any thoughts or questions. 4
FCA Restricted Lending into Retirement- issues highlighted in DP Pension freedoms and impact upon affordability • Segmentation of advice due to different regulatory regimes • Consistency in understanding of regulatory attitudes and constraints • Upper age limits in Mortgages • The need to assess the regulatory regime alongside demographic • changes to ensure it remains fit for purpose Challenge of assessing income as people approach retirement • 5
FCA Restricted Discussion Paper Responses Our DP window closed on the 15 th April. • We received over 50 submissions from firms, trade bodies, consumers and the • third sector, professional bodies and think tanks . Written responses will be considered alongside the face to face engagement we • have had with stakeholders and will help inform our prioritisation of issues. We received an interesting response from the Equity Release Council, as well as a • number of member firms. Themes Specifically in the area of Equity Release, numerous industry representatives fed back to us that; The market is increasingly competitive • Consumer demand for equity release products is on the rise • Consumer satisfaction with equity release products is represented by low FOS • complaints and low buyer remorse Current voluntary standards offer a number of consumer safeguards • There is clear appetite to innovate in this market • 6
FCA Restricted Hybrid Lifetime Mortgage- By consent waiver We announced a Modification by consent for a Hybrid Lifetime • Mortgage on the 7 th April. The by consent relates to a particular form of hybrid lifetime • mortgage (one that starts as interest-only but which converts to interest roll-up whenever the consumer chooses). Providers will be able to offer these without having to meet the • MCOB 11.6 requirement to assess affordability. If you want to take advantage of this modification by consent • you should email centralwaiversteam@fca.org.uk or write to us at Central Waivers Team, Financial Conduct Authority, 25 The North Colonnade, London, E14 5HS. 7
FCA Restricted Collaborative working This regulatory issue in relation to by consent mortgages was brought • to our attention through the FCA’s engagement with industry and other stakeholders. The by consent is an example of the FCA working alongside industry to • discuss and remove regulatory barriers, in the interests of consumers. We have received positive feedback on the waiver, and we thank the • ERC for their public statement of support. We are keen to bring to light more opportunities for markets to adapt • and better meet consumer needs in the future. We recognise that we need to work together to find solutions- we are • keen to engage with you and to lead a helpful, forward looking debate. 8
FCA Restricted Next Steps This project is an example of proactive regulation , and an area where • we believe that the FCA can take a leading role in driving better market outcomes. The output of this project is a regulatory strategy for older • consumers (to be launched in 2017). Our DP consultation phase closed on the 15 th April and we are in the • process of reviewing responses. Alongside this, we’re conducting a programme of research and we will be holding a series of roundtables to discuss specific emerging issues. At this stage in the project, our scope is relatively open . We are • currently in the process of prioritising issues and setting the direction of travel, so we would encourage you to get in touch with any information relating to challenges and opportunities facing the ageing population. 9
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