One of the major UK life companies; Just Retirement  has been taken over by the private equity company Permira in a £225.5 million ($360.5 million) agreement.

Permira-backed bid vehicle Avalon Acquisitions are offering 76p per share for the whole Just Retirement company and they are to also inject £25 million into them once the complete takeover is agreed through an increase in capital.

Just Retirement, which provides investment products for retirement purposes, such as equity release & annuities revealed it had received bid approaches last November and confirmed earlier this year they were working with Permira towards a deal.

The deal also includes a securities alternative, under which shareholders can opt to receive one non-listed unit for every ten Just Retirement shares in order to retain an interest in the company.

Just Retirement has also reported results for the year to 30th June which shows that the European Embedded Value of underlying pretax operating profit of £79.4 million which is up 20% on the previous year.

Just Retirement hierarchy have confirmed that current trading was very satisfactory.

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Recent news has it that Newcastle Building Society has announced it is to withdraw from the equity release advice market.

The Newcastle Building Society Equity Release Service is set to close by the end of the year. This follows hot on the heels of the news that several other equity release companies have also followed suit in deciding to withdraw from equity release advice.

According to Newcastle Building Society they have stated that the recent economic turbulence has led to a considerable reduction of lending in the equity release market & has led them to close down this arm of the building society.

The Newcastle did provide advice to clients who were considering taking out equity release.

However, they have made the business decision that equity release is no longer a viable option anymore.

Unfortunately, as a consequence five posts are to be made redundant, with consultation beginning concerning the individuals affected.”

SHIP (Safe Home Income Plans) which is the trade body for equity release providers said it would urge the government to create a guide covering equity release and other retirement products.

Andrea Rozario, director general of SHIP, said politicians could be playing a greater role in assisting & encouraging promotion of equity release to assist their retirement lifestyles.

She has credited political figures such as Lord Lipsey, ex-chairman of the Financial Services Consumer Panel, with helping raising the profile of the equity release products.

According to SHIP, a government guide should cover equity release as well as advice on annuities and steps on how to claim the state pension.

Ms Rozario said this would help consumers to explore the various options open to them in retirement.

She said: “It will help them navigate their way through the minefield of retirement planning.”

Research has also shown that equity release schemes are becoming even more relevant as baby boomers reached retirement.

The reasoning behind this is that attitudes to retirement are changing & this ‘new’ generation has a more ‘live for today’ rationale. With the state pension issues currently, this is another factor for this generation to consider.

Recent discussions on this topic have led to the conclusion that equity release was an “obvious solution” to allow this generation to release equity tied up their properties & thereby fund their retirement.

Unfortunately, there is still a level of misunderstanding about the equity release sector among consumers and equity release advisers & this needs to be fixed.

This is not the first time Ship has expressed a desire to work with the government on equity release.

In its July briefing, Ship called on the government to undertake a review into the role equity release can play in retirement planning.

Home & Capital, the home reversion scheme specialist, has bought upt 1,000 equity release plans from the now defunct In Retirement Services, after the equity release provider recently went into administration.

 
The transaction now increases Home & Capitals’ equity release plans under administration from 2,000 to 3,000. A long-term contract is expected to be announced in due course.

In Retirement Services customers under this new regime will now have a voice to answer to regarding administration moving forward.

Just Retirement has enjoyed a strong fourth quarter in the three months to the end of June and says it has got off to a good start in the new financial year. 

The provider has even managed to increase its equity release market share to an estimated 19%, compared to 14% in 2008. 

Sales of its equity release schemes have therefore risen significantly, possibly as a consequence of its intermediary offering on its Lifetime Mortage plan.

Just Retirements market share with annuities is now estimated at 6% – compared to 5.5% last year.

In the 12 months to the end of June sales totalled £753 million, a 1.3% drop on the 2008 figure of £763.5 million. However, total sales for the fourth quarter hit £234.9 million, 20% above the previous high.

Equity release sales increased 17% quarter on quarter, but fell 9% compared with a year earlier. Over the full year sales rose 2.5%.

This initial reduction in equity release mortgage advances was cited on the adverse housing market which has thereby been affected by reduced valuations.

Mike Fuller, chief executive of Just Retirement said: ‘This performance is validation of the profit-focused strategy we have been operating throughout the last year, during which we have concentrated on maximising returns to shareholders rather than matching irrational rates from our competitors.

‘As these competing rates have returned to more normal levels, our competitive position has improved considerably, leading to this strong performance.’

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Robin Allen, joint administrator of In Retirement Services, says: “Unfortunately, it has not been possible to secure funding to enable the group to remain outside of an insolvency process.

“We are currently working with management to determine the best strategy for maximising value for the group’s stakeholders and preserving the continuity of services to its 14,000 customers.”

The company was backed by private equity house 3i and was part of the equity release trade body Safe Home Income Plans.

Customers of In Retirement Services with queries should call use their usual point of contact within the In Retirement Services group.

Bridgewater is especially concerned by the Which? results regarding advisers’ understanding and lack of consideration of home reversion plans. Which? has expressed ‘disappointment’ that almost a half of all the 40 advisers it visited either didn’t mention, or dismissed out of hand, home reversion plans. Home Reversion Plans are one of two regulated equity release products along with Lifetime mortgages and should be actively considered by all advisers in any provision of equity release advice.

Alison Beeston, Compliance & Communications Manager at Bridgewater Equity Release, commented: “We are disappointed with the results of the Which? research particularly the lack of adviser consideration for home reversion plans. While we are not surprised that some advisers ignore or dismiss home reversion plans, we are surprised at the significant numbers Which? found who are not providing, at the very least, generic information about the products.

“As a home reversion provider we have come across varied misconceptions about the plans themselves and we would urge advisers to make concerted efforts to understand the products and provide relevant information to their clients. In order for the adviser community to avoid further criticism of this nature, and to ensure they provide the right advice and recommendations, advisers must actively consider the plans in any discussion of equity release. We recognise that home reversions are not suitable for every single customer. However they may be appropriate for those looking for the reassurance of knowing, up-front, the total proportion of equity they have given up and/or the security and certainty of knowing there is equity left for their beneficiaries or themselves in future.

“Bridgewater distributes exclusively through advisers and we are committed to providing educational support to all those involved in the equity release sector. We would urge all those advisers looking for home reversion information or training to contact us for help.”

Not one of the 40 advisers visited by Which? recommended a home reversion plan, six didn’t mention them at all and 13 dismissed them without an adequate discussion about why they might be unsuitable. Which? also says many of the advisers were either ‘misinformed’ or ‘resorted to scaremongering’ when it came to home reversion plans. For example, some advisers told Which? researchers that, with a reversion, they have to sell 100% of their home which is not true; 14 advisers did not explain or didn’t explain properly that a customer would have to sell at below market price with a reversion plan.

For expert independent advice on ALL products from the equity release market please call 0800 783 9652.

Equity Release Supermarket

In the three months to the end of June, the number of new plans sold fell an annual 24% to 5,143.

Furthermore, the property market downturn meant that the value of new lending plummeted 41%, from £319 million in the second quarter of 2008, to £189 million.

The average property value declined to £205,675 in the three months to the end of June, compared to £224,487 in the same period last year.

The average loan value therefore fell by 23% to £40,766, also reflecting stronger take up of drawdown plans which allow for a low initial release to be topped up by further funds when needed.

People were releasing cash for the usual variety of reasons, with home improvements topping the list.

However, offering financial assistance to children took second place in priorities for the first time.

The average age for those entering agreements fell slightly during the second quarter of 2009 to 67, continuing a trend of the past two years.

Market sentiment feels that the demand for equity release will continue, and following this turbulent period will return to, and then exceed, previous business levels.

However, these figures are a long way from predictions made at the beginning of the year by Safe Home Income Plans (SHIP), the body that represents the UK’s equity release providers.

According to SHIP’s research, firms in the sector expected equity release schemes volume to increase during 2009, expanding the market by £200 million in total, to £1.4 billion, by the end of the year.