Download - An Introduction to Reversion Plans Peter Couch Managing Director Bridgewater Equity Release
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An Introduction to Reversion Plans
Peter CouchManaging DirectorBridgewater Equity Release
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Definition of a Reversion plan
Under a home reversion plan a homeowner sells part or all
of the home in return for a lump sum or income and the right
to remain in the house until they die or move into care. The
lump sum or income depends on a number of factors
including the age of the owners and the value of the
property. When the former owner dies or moves into care
the reversion provider can sell the property.
Source – Defining Home Reversions (HM Treasury consultation document, July 2004)
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Fundamental Differences
Reversion
• Provides the client with certainty of legacy
• A higher cash release is available
• Greater certainty of future releases
Lifetime Mortgage
• The client retains both the risk and reward of HPI and Mortality
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Key Risks
Reversion Lifetime Mortgage
If client lives longer than
assumed Provider Customer
If HPI is low Provider Customer (NNEG)
Guaranteed legacy Provider Customer
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When would a Reversion be more appropriate?
1. Guaranteed legacy
2. Release maximum cash / income
3. Same cash as a Lifetime Mortgage but with the
certainty of a legacy / further releases
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Fundamental need to understand
your client’s attitude to risk
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Years HPI Property Value
Average HPI At end of year
2 0% £250,000 0% 2
1 -15% £212,500 - 15% 3
11 5% £363,000 2.70% 14
13 5% £401,000 2.99% 16
1 - 5% £381,000 2.50% 17
5 3% £442,000 2.62% 22
An HPI scenario
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Comparisons
0
50
100
150
200
250
300
350
400
Legacy £000
0% HPI 2.5% HPI 5% HPI
REV
LTM
Male, 70 yo, life expectancy 16 years, initial property value £250,000, 50% reversion, £62,000 released. LTM interest of 6.95% assumed.
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Comparisons
0
50
100
150
200
250
300
350
Legacy £000
0% HPI 2.5% HPI 5% HPI
REV
LTM
Female, 75 yo, life expectancy 14 years, initial property value £250,000, 50% reversion, £65,000 released. LTM interest of 6.95% assumed.
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Comparisons
0
100
200
300
400
500
600
Legacy £000
0% HPI 2.5% HPI 5% HPI
REV
LTM
Joint lives, both 70 yo, life expectancy 22 years, initial property value £250,000, 50% reversion, £50,000 released. LTM interest of 6.95% assumed.
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Comparisons
050
100150200250300350400450
Legacy £000
0% HPI 2.5% HPI 5% HPI
REV
LTM
Joint lives, both 75 yo, life expectancy 17 years, initial property value £250,000, 50% reversion, £59,000 released. LTM interest of 6.95% assumed.
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Maximum Lifetime
Mortgage advance
Maximum Reversion
release
Difference
£ %
Male 70 £87,500 £123,000 + £35,000 + 40%
Female 75 £100,000 £129,000 + £29,000 + 29%
Joint 70 £87,500 £100,000 + £12,500 + 14%
Joint 75 £100,000 £118,000 + £18,000 + 18%
Maximum cash release
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SHIP Reversion Providers
• Bridgewater Equity Release
• GE Life
• Hodge Equity Release
• Home & Capital Trust
• Key Retirement Solutions
• Norwich Union
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Regulation
Now
• MCOB 8 – Lifetime Mortgages
• Reversions must be considered
• SHIP Reversion Code of Conduct
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Regulation
Future
• Queen’s speech
• Reversion regulation in 18 months
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Questions?
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Contacts
Bridgewater Equity Release0808 100 1065
Peter CouchManaging Director
07962 021949
Andrew DixonMarketing & Sales Manager
07917 531364
www.bridgewaterequityrelease.co.uk