GOVERNANCE
FINANCIAL STATEMENTS
strategic report
Just is forecasting that the LTM market will experience a period of stagnation and potential decline in 2023, as the market and consumer demand adjusts to increased interest rates and the potential property market impacts of increased inflation. We forecast the market will return to growth in 2024 and will exceed the £6.2bn recorded in 2022. The primary drivers of growth are: • households wanting to top up their retirement income to improve their, or their family’s standard of living in later life; • people with outstanding interest-only mortgages who are entering retirement and require a solution to settle the debt with the existing mortgage company; • strong demographic growth. The number of people aged 65 and over is forecast to increase from around 13 million today to around 17 million by 2040; and • strong investment in advertising which results in people becoming aware of LTMs, combined with people becoming more disposed to using some of their housing equity. In October 2020 the FCA wrote to Chief Executive Officers and board directors of lifetime mortgage lenders and mortgage intermediaries. The FCA set out their view of the key risks these firms pose to their consumers or the markets in which they operate. They outlined their expectations of firms including how firms should be mitigating these key risks. They described their supervisory strategy and programme of work to ensure that firms are meeting the regulators’ expectations and that any harms and risks of harm are being remedied and/or mitigated. The FCA stated they would be engaging with a number of firms across the industry and that phase of work was due to conclude in May 2021. In June 2022 they wrote to firms providing an updated view of their expectations, and key risks posed by firms in this sector and their supervisory plans. LONG-TERM CARE SOLUTIONS Care Plans, or immediate needs annuities, are a form of purchased life annuity. In exchange for an up-front premium, they provide a guaranteed income for the life of the insured to help contribute to the cost of their care. Under current rules this income is tax free when paid directly to a registered care provider, with Care Plans available both to individuals entering care facilities and receiving domiciliary support. As such, Care Plans provide a form of longevity insurance to an individual against the ongoing costs of receiving care until their death. On 7 September 2021, the UK Prime Minister announced plans to substantially increase funding for health and social care over the period (2022-2025), to be funded by a new tax, the Health and Social Care Levy. From October 2023, the government had planned to introduce a new £86,000 cap on the amount anyone in England will have to spend on their personal care over their lifetime. The cap was to apply irrespective of a person’s age or income. The government said that the publication of the November 2021 document marked the start of a period of co-production of the statutory guidance with the sector, building on draft regulations and guidance published in 2015. It added that this would be followed by a public consultation early in 2022 with the intention that the final regulations and guidance will be published in spring 2022. In the November 2022 Autumn Statement, the government announced a delay to the national rollout of social care charging reforms from October 2023 to October 2025. CURRENT MARKET AND OUTLOOK There is a substantial market for care in the UK. The drivers of the need for care are strong because: • there are currently around 1.7 million people aged 85 or over in the UK – this is the average age at which people go into care homes; • this is the fastest growing demographic cohort, with its number expected to almost double over the next 25 years, suggesting a rate in excess of 2.6%; • 40% of all people in the UK aged 65 and over are estimated to have a limiting long-standing illness, which may require care in the future; and • the recent focus on pressures within the care sector has highlighted the need to plan for care, and any government reform will provide additional focus on the limited number of solutions currently available.
EXTERNAL GIFL MARKET (£M)
2,500
2,000
1,500
1,000
500
2015 2016
2017
2018
2019
2020
2021
2022
Source: Just analysis, ABI
L f t m mrgg mre s z ad g o t rt (£m) LIFETIME MORTGAGE MARKET SIZE AND GROWTH RATE (£M)
6,000
5,000
4,000
3,000
2,000
1,000
2017 2018 2019 2020 2021 2022 2011 2012 2013 2014 2015 2016
Lump sum mortgage sales
Existing drawdown mortgages – further advances Source: Equity Release Council New drawdown mortgages – initial advance
N m e o pol (mlin ) a e 60 + NUMBER OF PEOPLE (MILLIONS) AGE 60 +
% of UK population over age 60
25.0% 26.2% 27.9% 28.9% 29.3% 30.7%
25
20
15
10
5
2022
2025
2030
2035
2050
2040
Source: O ce for National Statistics
A LEADER IN UK LONG-TERM CARE FINANCIAL SOLUTIONS FOR 22 years
13
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