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Equity Release Schemes

: My hon. Friend talks perfect sense. What he describes is a real worry. In case I am accused of being unfair to Norwich Union, I shall mention another household name: that of Prudential. The Pru is seen—probably deservedly—as a more enlightened provider, which is new to the market. It has an attractive draw-down scheme. Such schemes work on the basis that one can avoid the doubling of interest over 10 years by taking out the money in bits, so people are not charged for the parts of the loan that they do not need at the time. In other schemes they have to take out the whole loan because there is a minimum amount: they may need £5,000, but they have to take £25,000. On its website, the Pru has an attractive draw-down scheme, which, instead of saddling customers with a big loan with compound interest, allows them to take the money in bits. The only drawback appears to be that the minimum amount that they can borrow is £20,000, so they would have to take a large amount overall. They can take more—the Pru will set a maximum sum and they can draw money up to that amount—but in the first instance they have to take £20,000, and over 10 years, the customer will have to pay back £40,000. The last point that I want to raise with the Minister relates to the uncertainty in the market about whether the industry can discipline itself to act sensitively on appropriate sales. One of the main reasons for seeking a loan is for house repairs or improvements. Will the Minister begin discussions with the Office of the Deputy Prime Minister and local authorities to see whether the initiatives launched by councils to formulate loan schemes, often as a replacement for grant schemes that have been withdrawn, are worthy of encouragement and wider publicity? If the Minister contacts Which?, he will be provided with a list of interesting initiatives around the country on the basis of which it would be easy to produce a scheme that could be put into the public domain, which would lead private providers to behave more sensibly. In his pre-Budget report, the Chancellor introduced measures to encourage pensioners to install central heating and energy conservation in their homes. If a scheme could be introduced that meant pensioners did not have to take a chance on such costly, uncertain, long-term commitments as equity release to have urgent repairs or improvements carried out, it might mean that only those who genuinely understood the schemes and their consequential costs would use equity release. However inadequate my remarks, I hope that I have put across the danger of those products—or, as the FSA describes it, the ““high risk”” of them. It is a great concern that firms market them as easy, almost painless ways of buying luxuries. Above all, the evidence of products being sold without the customer—who is sometimes frail or vulnerable—being fully advised should be deeply worrying to everyone connected with the product. There is a role for such schemes, but I fear that at this moment in the development of schemes, a number of ordinary decent people are being harmed. That should be made public, and should be addressed.