Interesting report out today from the Joseph Rowntree Foundation shows council staff (not just from social care but other departments) have proved reluctant to refer people to a financial adviser to consider using equity release to fund care and support at home.
It finds a scepticism about equity release and a lack of confidence in front-line staff about issuing financial advice, as well a wider perception that equity release is risky.
The implications of impending reforms to care funding (post-Dilnot) is that council information and advice staff and social care professionals will be expected to play more of a role in signposting people to financial advice about care.
So I was just wondering whether people do feel (or would feel) comfortable about this?
Absolutley not comfortable with that idea. Fine helping with service users to budget/shop. But to help them enter in to financial arrangements with organisations bent on profits NO WAY!
JBD: Absolutley not comfortable with that idea. Fine helping with service users to budget/shop. But to help them enter in to financial arrangements with organisations bent on profits NO WAY!
A quick google suggests you need to be registered with the FSA and subject to its regulations to offer independent financial advice.
Now the difference between an independent financial adviser and a council debt counsellor may be difficult to delineate at some level, but given that a property is an investment, the value of which can go up or down, I think we may be venturing into IFA territory, particularly if it is linked to a mortgage product.
As far as I can see the events of the last few years have demonstrated that there is no such thing as safe financial advice.
All Financial advice is a profit inspired and motivated guess ( whether "educated" or not) and there will always be a range of unknown unknowables about it.
Why would I get involved with informing and sharing responsibility for somebody gambling with their means of support?
At least for the individual gambler there is a chance of a pay-out if the gamble pays off. For the social worker advising them, there is only the risk of blame for it going wrong.
Why would you do it?
And if you are that previously undiscovered person who can can actually do it and are good at; it why are you not changing jobs and getting paid decently for helping people?
After all, if you can give accurate financial advice that pays off you can help a hell of a lot more people than you can with a case load of fifty, in a team with two vacancies, two on leave and one off sick....not to mention red tape, administration, compulsorary data returns, and one size fits all assesment frameworks.
Sorry folks must be my Seasonal Affective Disorder reacting to January
Silver Sage: A quick google suggests you need to be registered with the FSA and subject to its regulations to offer independent financial advice. Now the difference between an independent financial adviser and a council debt counsellor may be difficult to delineate at some level, but given that a property is an investment, the value of which can go up or down, I think we may be venturing into IFA territory, particularly if it is linked to a mortgage product. As far as I can see the events of the last few years have demonstrated that there is no such thing as safe financial advice. All Financial advice is a profit inspired and motivated guess ( whether "educated" or not) and there will always be a range of unknown unknowables about it. Why would I get involved with informing and sharing responsibility for somebody gambling with their means of support? At least for the individual gambler there is a chance of a pay-out if the gamble pays off. For the social worker advising them, there is only the risk of blame for it going wrong. Why would you do it? And if you are that previously undiscovered person who can can actually do it and are good at; it why are you not changing jobs and getting paid decently for helping people? After all, if you can give accurate financial advice that pays off you can help a hell of a lot more people than you can with a case load of fifty, in a team with two vacancies, two on leave and one off sick....not to mention red tape, administration, compulsorary data returns, and one size fits all assesment frameworks. Sorry folks must be my Seasonal Affective Disorder reacting to January
Shirack: JBD: Absolutley not comfortable with that idea. Fine helping with service users to budget/shop. But to help them enter in to financial arrangements with organisations bent on profits NO WAY! Limits the field a bit.
lol indeed.
Not sure why someone making a profit is bad -as long as you are as well its all gravy. Its the quality of the advice thats important. Sure a general recommendation is to find out their results/ performance and whether they are better than chance - seem to remember a TV report that said a lot of financial advisers that worked for banks werent actually adding any value to peoples outcomes.
It is a mystery to me!
You can't afford care, so you take a loan secured on your property.
To pay back the loan, the repayments have to be cheaper per week than the cost of the care per week, because otherwise you would be able to pay the care without needing a loan.
Seeing as it is predictable that you, at that stage, will need care for the rest of your life, the repayments can't be simply spread over a longer period than you need the care, so the weekly repayments have to be more than the cost of the care because there will be interest.
Alternatively you are only borrowing enough for a set period of care, and the repayments go on beyond that period, by which time you have a real problem if you still need to finance continuing care at that stage.
The bottom line is that the loan company wants your property in exchange for lending you a hell of a lot less than the value of the property and is obviscating the clauses that mean they can claim it after certain periods, or when certain trigger events click in.
Otherwise I can't see how it can possibly work....but then again, I was never that good at maths! ( which is why I became a social worker not a wealthy person)
@ Shirack;
I bet your team was working out of a paper bag in't middle o't road, and you used to have to lick t'road clean wi' tongue before working 27hours a day counselling down't pit..etc???
Silver Sage: @ Shirack; I bet your team was working out of a paper bag in't middle o't road, and you used to have to lick t'road clean wi' tongue before working 27hours a day counselling down't pit..etc???
Right. I had to get up in the morning at ten o'clock at night half an hour before I went to bed, drink a cup of sulphuric acid, work twenty-nine hours a day down mill, and pay mill owner for permission to come to work, and when we got home, our Dad and our mother would kill us and dance about on our graves singing Hallelujah.
You tell the young people today of that and they won't believe you.
And who would have thought that we would be here to day, able to drink Chateux de Chablis funded with a Home Equity Release mortgage?
Social workers have no role and should never offer financial advice directly. There is a major diference between offering benefits advice and financial advice - the latter probably leaves you open to being sued.
'Silver Sage' is correct in the warnings given above,
Raises massive ethical questions for me. No way would I be comfortable with this.
As pointed out above, where is the source of truly independent financial advice anyway?? The world of 'financial advisers' is unregualted (as far as I know) and many just want to sell their products, and at worst are out and out charlatans. I would think that this is a role for a third party voluntary sector organisation that is truly independent from any profit based motives for providing advice. I might feel more comfortable suggesting a client speaks to an organisation like that, but really it is not the job of a social worker at all.
Selks: Raises massive ethical questions for me. No way would I be comfortable with this. As pointed out above, where is the source of truly independent financial advice anyway?? The world of 'financial advisers' is unregualted (as far as I know) and many just want to sell their products, and at worst are out and out charlatans. I would think that this is a role for a third party voluntary sector organisation that is truly independent from any profit based motives for providing advice. I might feel more comfortable suggesting a client speaks to an organisation like that, but really it is not the job of a social worker at all.
A credit Union loan is used by many people who are already Credit Union members - the posting is, however, about giving financial advice to SU's - and it is best avoided at all costs other than to advise them that it appears that they may be better consulting a financial adviser - and preferably, yes, an Independent one but certainly one regulated by the FSA.
FSA state that poor or disastrous performance of a product recommended by an IFA is not anything they would look at , regulate or award compensation for. It is a gamble and as long as people are advised of the risks that is fine.
Only if they have been sold a product that is unsuitable for the purposes the client has indicated is it a problem.And even then if they can produce a copy of a signature on a small print terms and conditions document that explains the purposes of the product they are normally safe.
All of the collapsed and bailed out banks and financial institutes in the UK were regulated by the FSA, so if your private pension was gambled on a high risk market by them and lost, and you will now retire on £500 a year instead of £5000 .....that is not "wrong" or an issue that the FSA would see as under their remit.
So regulation by FSA does not really help SUs
Caveat emptor.
Rupert M: Caveat emptor.
Cravated emptier !
I certainly would be very reluctant as there is evidence of much ripping off of older people having taken place with these schemes. I can see that people who have an expensive property but no ready cash and who need low level support which is no longer available from the public sector could be helped, but even with the endorsement of Jospeh Rowntree and Age UK, I would have reservations. There is little evidence of those who run these schemes having the wellbeing or fair treatment of people at heart; quite the reverse in fact. There is also an issue about signposting someone to a specific product – could we not be accused of commercial favouritism and sued by the other companies that offer these products? Or sued by service user if the thing went wrong?
Agreed...the Joseph Rowntree one SEEMS better because it cuts the tax man out by allowing monthly drawdown of the agreed equity release amount and avoids tax which would be incurred by releasing larger amounts.
The other advantages to the finance company must be the same and they end up with your property for much less than it was worth in the end.
I suppose Rowntree are talking relativity and least wort options perhaps?
sorry "least worst"
certainly seems a minefield - dont we have enough to do already?
Unless they envision it being the same way as advice about private care provided - which in my office took the form of a list of companies being sent in the post.
http://www.compare-equity-release.com/index_bulk1LT.php?gclid=CLq757vz8K0CFUcTfAodjj7CtA
Sorry, they want my name address age and postcode and how much my home is worth and my e-mail address and how much I owe if anything.......before I can access any information on this site.....and you know what that means? Yes I am sold to all the equity release products salesmen on the planet.
Seller beware!!!
What about these chaps / chapesses?
http://www.societyoflaterlifeadvisers.co.uk/
Is anyone in the position of being asked / pressured to give this kind of financial advice currently?
Selks: Is anyone in the position of being asked / pressured to give this kind of financial advice currently?
We recommend that service users talk to a financial advisor - and have worked with Age UK and Trading Standards to provide a mechanism to contact SOLLA to access IFA advice. We do not give financial advice, nor do we require service users take it - we just recommend that they talk to someone about it.
The inclusion of AgeUK and Trading Standards was a key factor for us - in suggesting SOLLA as the route that might be worth taking. It was also really important to us that we didn't recommend specific providers (there are local authorities that do) .
Silver Sage: It is a mystery to me! You can't afford care, so you take a loan secured on your property. To pay back the loan, the repayments have to be cheaper per week than the cost of the care per week, because otherwise you would be able to pay the care without needing a loan. Seeing as it is predictable that you, at that stage, will need care for the rest of your life, the repayments can't be simply spread over a longer period than you need the care, so the weekly repayments have to be more than the cost of the care because there will be interest. Alternatively you are only borrowing enough for a set period of care, and the repayments go on beyond that period, by which time you have a real problem if you still need to finance continuing care at that stage. The bottom line is that the loan company wants your property in exchange for lending you a hell of a lot less than the value of the property and is obviscating the clauses that mean they can claim it after certain periods, or when certain trigger events click in. Otherwise I can't see how it can possibly work....but then again, I was never that good at maths! ( which is why I became a social worker not a wealthy person)
You don't pay back the loan while you are alive, or while you are living at home. You pay it back from the sale of the property on your death or your move into care, whichever comes first. If you take a loan based on the expectation you'll be dead in five years, and you're still hale and hearty at the end of that time, I assume you'd borrow more and the company would get even more of your estate when you die.
I understand that for some people it works well, but I would never get involved in giving that sort of financial advice. If someone asked about it as an option I would advise them to get independent financial advice and not to sign anything until they'd talked it over with their family and their solicitor.
Richard Hillman on Coronation Street (previously that nice Mr Hopwood on Grange Hill) was in the equity release business but found himself short of cash when the elderly people didn't die quickly enough so he started bumping them off himself. I don't think that happens very often in real life though.
I see the principle, but as you say, if you don't die within the five years and you have to borrow more, presumably the "lender" or equity advancer" has to pay interest on the money he has lent you, so at some point, he starts losing because the money you have borrowed plus the presumed profit he was expecting plus the interest that he isn't getting comes to more than the value of the property.
If I wanted to borrow £50 k over five years (£10k a year for care is not exceptional) at 6% and I wasn't paying anything back I would owe £66k at the end of five years.
I imagine the equivalent of interest rate would be higher because it is a gamble as to when the return will come in.
So basically, if I live in an average house worth £160k and I borrow two lots of £50k over two consecutive five year periods, then the house is probably forfeit. The lender needs to get back the company's money, the equivalent value of interest in profit, and the costs of transactions stamp duty, legal fees and the uncertaintly of future value.....so I could be out on my ear and skint and still needing care I can no longer afford to buy.
I have a very close relative who had a very large malignant tumour in her bowel, two minor strokes, diabetes and pretty debilatating arthritus and osteoporosis at the age of seventy.
Nearly 20 years later she is still living (though it has long been a painful daily struggle) in semi-independence in sheltered housing with care coming in twice daily.
If she had gone into equity release 20 years ago, it would have been an interesting case study.
It would be nice if an equity release company could post on here the exact technical details in a range of possible scenarios posed by a range of us "overcautious" types!
Well, I suppose that's the risk the equity companies take. They wouldn't be doing it if they couldn't make a profit. They might take a loss on a few surprise survivors, but they'll be coming out on top overall.
So you reckon, its not a fool proof scheme for the finance companies, they do wait until you are dead before they claim your house no mater how long you survive?
I vaguely remember a long while ago tales of elders being evicted one certain time of financial triggers kicked in, but that might be older and more rare cases
Well, it's not something I know much about, but I imagine the person requiring the equity release wouldn't sign a contract that required repayment of the loan before the house was sold, and then it depends if the house is sold when (if) they go into care or after they die. If you don't want an agreement that says "you pay this back after five years regardless of whether you're still living at home" you don't sign it.