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Equity Release Schemes

: My hon. Friend makes a reasonable point, but just to be clear, the figure of 57 that I gave earlier is the number of firms operating in the equity release market. The majority offer lifetime mortgages rather than home reversions—in other words, they offer the products that are already regulated—so he should take as an encouraging sign the total number of members of SHIP, as that represents a large part of the biggest providers of the home reversion-type product. Because the current voluntary system does not provide the sort of protection that consumers need, we launched a consultation in November 2003, and in 2004 the Government announced that we would in future empower the FSA to regulate those financial products. We introduced the required primary legislation, the Regulation of Financial Services (Land Transactions) Act 2005, last year. I am pleased to say that it received support from both sides of the House. It was debated pretty fully, and my close friend and colleague the Economic Secretary led the debate as the Bill made its passage through Parliament. It gained Royal Assent just before Christmas. As I have said, as soon as possible we in the Treasury will introduce the necessary secondary legislation to define precisely which products and activities will be regulated by the FSA. Once the secondary legislation has been consulted on, the FSA will consult on the detailed rules that will apply to those products. Given the powers granted by the 2005 Act, the sort of rules that one would expect the FSA to apply to home reversions would include rules to ensure that providers advise of risks as well as benefits when advertising reversion schemes, and rules on advice to consumers to ensure that advisers have considered implications for tax and benefits—a point made by my hon. Friend the Member for Leeds, East and the hon. Member for Twickenham—and have matched the consumer's overall needs and circumstances to the product features. Also, one would expect a requirement for firms to issue key product information to consumers in a clear and understandable format. Furthermore, FSA regulation will offer consumers access to the Financial Ombudsman Service in the event that they wish to make a complaint, and that will provide them with cover under the financial services compensation scheme. Encouragingly, although perhaps not surprisingly, the industry has been a keen proponent of regulation for reversion plans, as it wants to remove any consumer confusion and, of course, boost consumer confidence in the market as a whole. Indeed, when my hon. Friend the Member for Leeds, East had secured this debate, my hon. Friend the Economic Secretary was contacted by the Association of British Insurers, which made clear to him directly its support for enhanced consumer protection of home reversion schemes. It makes three recommendations: first, advice provided by firms to consumers should be simple and complete; secondly, advice should include schemes' implications for tax and means-tested benefits; and, thirdly, consumers should have their properties independently valued, a point raised in this debate. In summing up, it is fair to say that equity release schemes can help people—particularly the asset rich but cash poor—to enjoy a higher standard of life, but they are complex products and are not suitable for everyone. It is important to understand what they will mean in practice, and consumers should always seek independent financial advice. I direct consumers and hon. Members, if they do not have copies to hand in their constituency office, to a leaflet on equity release published by the FSA called ““Thinking of Raising Money from your Home?”” FSA regulation ensures that consumers have the right information and advice to hand when choosing a mortgage, and it provides redress mechanisms in the event of complaints. Proportionate and effective regulation should protect elderly people, who are some of the most vulnerable people in our society, allowing them to make informed choices about the financial arrangements that are best for them. Of course, increased consumer confidence is an essential foundation for a competitive, diverse and fair mortgage market in the UK—a general economic aim that I am sure all hon. Members who participated in this debate would support.