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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