Equity release firms could be forced to pass on the rise in employers’ National Insurance contributions (NICs) to customers or cut their workforce to stay profitable, said a later life CEO.
Chancellor Rachel Reeves’ decision to up the rate of employers’ NICs and lower the threshold at which they are paid from 1 April 2025 will pile pressure on already struggling later life firms that may have no choice but to hike fees, which could lock customers out of advice, said Will Hale, chief executive of Key Later Life Finance.
“For a sector already under significant financial challenges, this will be very difficult for employers to absorb,” said Hale in an interview with Mortgage Solutions.
“Businesses will have to think [about] how they will absorb these increases. Do we need to look at customer charges? It could be a necessity for some firms. Or do they need to look at their cost base, headcount and how they are remunerated?
“It is additional pressure caused by the Budget and could impact customers being able to access advice. It’s an unintended consequence,” he added.
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Holistic advice needed
Hale said that Reeves’ announcement that previously exempt pensions would be added to the total value of other assets when calculating inheritance tax from 2027 would impact how advice was given in the later life market.
Hale said: “It’s a further challenge for the later life lending market. One strategy was to take equity of the home before touching pensions to mitigate the inheritance tax bill. But that’s now changed.”
Hale said these growing complexities in the later life financial planning market and first-time buyers coming to the market in their mid-to-late 30s heightened the importance of advisers thinking more ‘holistically’ about equity release alongside other financial planning.
He said: “I don’t think equity release advice models are dead, but they are a lot less relevant than they were previously.”
“Since Consumer Duty, it is less about selling products; advice models need to adapt to put the customer first to get the right outcome, even if it is outside their own area of expertise.
“Irrespective of what channel [the customer] comes through, they should get a consistent outcome,” he added.
He admitted, however, that it was unlikely that one adviser would be able to cover the whole range of financial solutions themselves. While advisers would need a general understanding of other financial solutions that would sit within the wealth and mortgage advice markets, by partnering with professionals in different fields, they could direct customers to the best advice.
Hale said advice and distribution models and mortgage advisers all needed to step up to help customers find the right products.
