An Introduction to Reversion Plans Peter Couch Managing Director Bridgewater Equity Release

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)

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

Key Risks ReversionLifetime Mortgage If client lives longer than assumedProviderCustomer If HPIis lowProviderCustomer (NNEG) Guaranteed legacyProviderCustomer

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

Fundamental need to understand your client’s attitude to risk

YearsHPIProperty Value Average HPIAt end of year 20%£250,0000%2 1-15%£212, %3 115%£363, %14 135%£401, % %£381, %17 53%£442, %22 An HPI scenario

Comparisons Male, 70 yo, life expectancy 16 years, initial property value £250,000, 50% reversion, £62,000 released. LTM interest of 6.95% assumed.

Comparisons Female, 75 yo, life expectancy 14 years, initial property value £250,000, 50% reversion, £65,000 released. LTM interest of 6.95% assumed.

Comparisons 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.

Comparisons 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.

Maximum Lifetime Mortgage advance Maximum Reversion release Difference £% Male 70£87,500£123,000+ £35, % Female 75£100,000£129,000+ £29, % Joint 70£87,500£100,000+ £12, % Joint 75£100,000£118,000+ £18, % Maximum cash release

SHIP Reversion Providers Bridgewater Equity Release GE Life Hodge Equity Release Home & Capital Trust Key Retirement Solutions Norwich Union

Regulation Now MCOB 8 – Lifetime Mortgages Reversions must be considered SHIP Reversion Code of Conduct

Regulation Future Queen’s speech Reversion regulation in 18 months

Questions?

Contacts Bridgewater Equity Release Peter Couch Managing Director Andrew Dixon Marketing & Sales Manager