Money Matters

The equity release industry is not usually a place for sudden shocks. But some advisers were left a little breathless today by sector heavyweight Prudential’s confirmation that it is pulling out of the market after nearly four years.

The Pru is a household name and was one of three main equity providers; it claimed about 25 per cent market share last year and its strong brand rubbed confidence into a sector tarnished in the past for running rough shod over its elderly customers.

But its withdrawal – largely because returns are not fast enough on the lifetime deals – was sudden and seemed to catch many on the hop, including the industry’s key supporters who rushed out statements today saying they believed the industry still had a strong future – even without a big fish like the Pru.

But how so? Over the past year there has been a rush of providers out of the market, including Northern Rock, who was a big rival to Aviva. A year ago there were 20 providers but now there are about 11, with only three big names left: Aviva, LV= and Just Retirement. If Pru’ s departure will have a neutral effect on competition, as some independent financial advisers were claiming today, how competitive was the market while such a big player like the Pru was around?

The trade body, Ship, and those equity release providers still in the market are working hard today to send out the message that the industry is committed to growth and product innovation. It should also be noted that the sector is suffering from the same problems experienced by mainstream providers, being a lack of funding for new loans due to the credit crunch.

But what do you think? Is it possible to have a shrinking market with no effect on interest rates and the types of products offered? Will this development make you think twice about taking out an equity release deal?