Capital Release Scheme - HELP!

Zagreus · #1 05-04-2004, 16:37

My father passed away four weeks ago and I have been gradually sorting out all the legal and financial implications for my mother. In the process I have come across the paperwork for the Capital Release Scheme they undertook four years ago, to buy a car and help put my niece (their grandaughter) through university.

It makes for truly appalling reading! Up to the point of my father's death my parents had received less than £25,000 - and yet for that amount of money the company who own the scheme (and now my parents' house) get 75% of its market value (approx £140,000).

My mother continues to receive £100 per month for life, which isn't index-linked. Given the current rate at which house prices are increasing and the fact that my mother is 80 years old the ultimate profit the company stand to make is truly DISGUSTING.

My parents solicitor had advised them against the scheme - but they desperately wanted to help my niece following the death of my sister. Clearly the company NPI, were more than happy to take what amounts to my parents' life-savings in return for little more than a pittance!

Although personally distressed at NPI's acquisition of my eventual inheritance, I am more concerned that with my father's death my mother's pension has more than halved. (We look after our elderley so-o-o-o-o well in this country.......)

Does anyone have any suggestions how I can extricate my mother's house from NPI - even it means transferring it to a different scheme of some kind.

I am told there are no regulations covering capital release schemes but I just can't take the sickening difference in money paid to my parents and the profit NPI stand to make.

I work in the managerial side of Newsquest, the largest newspaper, magazine and website publisher in England and Wales and fully intend to make sure that I get the maximum publicity possible to show up NPI for what it really is - but PLEASE PLEASE, there must be something I can do to get my mother more money without jeopardising the little monetary value left in the house.

She lives 220 miles away and as things stand she couldn't even afford to move into a shabby bedsit nearer to me with the money that would be left over from selling her home...... How the hell did we allowed such things to become legal?

Zagreus

**Editor** · #2 08-04-2004, 11:39

It sounds like your mother took out a shared appreciation mortgage.

You might be interested to read this:

Quote:

AN angry customer plans a blizzard of emails to support his campaign against a bank over a mortgage plan that has left him trapped and unable to sell his home.

Dr Robert Turner is calling on customers of Barclays, Halifax and Bank of Scotland to close their accounts and shun the banks. He is single-handedly trying to ignite a protest, hoping to shame Barclays into relenting on a mortgage deal that he says was unfair.

Mail on Sunday

Unfortunately your case is bound to be weakened because your mother's advisers counselled against the scheme.

There is a firm of solicitors in that Mail story - it might be worth getting in touch.

Quote:

Robert will be helped by solicitor Gareth Jones of law firm Withy King in Bath, Somerset. Jones is helping a number of other BoS and Barclays Sam borrowers and believes that many have potentially successful cases.

Jones says: 'There are several generic claims against the banks. Under the Consumer Credit Act and fairness of terms legislation, we think we can argue that these contracts are unfair.'

**Editor** · #3 08-04-2004, 11:41

This letter appeared recently in The Times

Releasing equity for retirement
From the Director General of the Association of British Insurers and others

Sir, We await with interest the result of the Treasuryfs recent consultation on the regulation of home reversion plans. The combination of increasing longevity and pressure on pension savings is leading to increased demand for alternative forms of income in retirement. A competitive equity release market (report and Business Editorfs commentary, April 2), with strong consumer protection, can encourage people to save confidently for the future.

We believe that a comprehensive regulatory framework across the whole of the market is essential to build consumer confidence and protection. Association of British Insurersf research shows that three quarters of people would have more confidence if the Financial Services Authority produced a proportionate and consistent regulatory framework for these schemes.

Equity release products are, by their nature, complex. Although most providers recognise the need to meet high standards, potential purchasers can be vulnerable. Regulation across the equity release market will give the older consumer the necessary protection and there will be no distortion of the market between different types of product.

We hope that the Government will listen to the views of industry, consumer and pensioner bodies and act to put this framework in place.

Yours sincerely,
MARY FRANCIS
(Director General, Association of British Insurers),
BOB BULLIVANT
(Managing Director, Society of Financial Advisers),
MICHAEL COOGAN
(Director General, Council of Mortgage Lenders),
CHRIS CUMMINGS
(Director, Association of Mortgage Intermediaries),
MICHAEL LAKE
(Director General, Help the Aged),
ED MAYO
(Chief Executive, National Consumer Council),
PAUL SMEE
(Director General, Association of Independent Financial Advisers),
Association of British Insurers,
51 Gresham Street, EC2V 7HQ.
April 2.

You might like to make your case known to The Times. The Personal Finance Editor is called Anne Ashworth.

**Editor** · #4 08-04-2004, 11:53

Mortgage based equity release schemes - to be called "lifetime mortgages" - will be regulated by the Financial Services Authority when it starts to regulate the mortgage industry later this year.

Unfortunately there are no firm plans for the regulation of home reversion schemes - where a householder sells a proportion of their home but retains the right to live in it until death - although the Council of Mortgage Lenders and SHIP (Safe Home Income Plans) are campaigning for this.

Quote:

UK equity release industry body, SHIP (Safe Home Income Plans), which represents 90% of the equity release industry, has submitted a strong paper in response to the Treasury consultation on home reversion schemes, urging the Government to regulate them.

SHIP believes regulation of home reversion schemes is imperative to ensure that consumers benefit from a fair choice of products in this fast growing marketplace and to protect consumers against the risk of unauthorised providers entering the market. The Government plans to regulate lifetime mortgages from October, yet home reversion plans are still under consideration.

SHIP is concerned that the introduction of regulation on lifetime mortgages in October, and not home reversions, will lead to a two-tier system. This is turn may result in consumer confusion, and may lead to brokers favouring lifetime mortgages over home reversions due to regulatory reasons and will ultimately reduce overall development of the equity release market.

Further to this, SHIP is pre-empting a move by the Government to regulate the industry and will introduce its own tough code of practice to ensure best possible consumer protection continues. In conjunction with this, SHIP is reviewing its rules and its role in enforcing compliance and a toughened complaints procedure. Central to the review, SHIP is also considering whether to bring in a new membership category to cover intermediaries. SHIP expects to make an announcement on these changes later in the Spring.

SHIP has contributed to Governmentfs consultation on home reversion schemes with the following key points:

Some SHIP members have sold reversion products over the last 35 years. No planholder who has taken out a plan with a SHIP member has been dispossessed of their home, or been exposed to negative equity.

Without regulation home reversion products may be created without appropriate minimum product safeguards and sold by brokers but subsequently administered by unknown private individuals with no professional experience.

Introduction of regulation would ensure home reversion products are sold in a manner which meets selling and information standards of other financial products.

A decision to regulate the sale of home reversions, combined with Government initiatives to promote REITS (Real Estate Investment Trusts), should lead to the availability of substantial new funding for the sector and consequent improvement of product terms, plus product diversification.

It is possible to use regulations by the FSA to reduce the risk of mis-selling and to eliminate the confusion regarding regulatory boundary however it is not possible or desirable to regulate pricing.

SHIP has been an active consumer watchdog since its inception in 1991 and recently established two product boards - representing lifetime mortgage and home reversion plans - to work alongside regulators to lobby the Government in the rapidly expanding equity release market.

The volume and value of home reversions has been in decline for four consecutive years, which is in contrast to a steadily increasing total equity release market. SHIP believes the uncertainty over the future regulatory environment has primarily contributed to reducing the attraction of home reversions in comparison with lifetime mortgages and this needs to be addressed.

Jon King, Chairman of SHIP said:

gWe welcome HM Treasuryfs decision to engage in a formal consultation process regarding the regulation of home reversion plans. We see this as a necessary step towards the eventual introduction of formal regulation.

gOver the last 13 years SHIP has always advocated Government regulation of equity release. In the interest of consumers, SHIP urges the Government to regulate home reversion schemes alongside lifetime mortgages to create a level playing field in the equity release market.

gRegardless of the Governmentfs actions, SHIP intends to maintain its position as the industry standard bearer that consumers can trust, and will be announcing a tough code of practice for reversion schemes very shortly.h

**Editor** · #5 10-04-2004, 16:07

CASH-POOR and asset-rich pensioners raised more than £1.16bn on their homes last year. But one Money Mail reader has a stark warning for those thinking of releasing equity in their home in retirement.

Businessman David Henscoe was shocked to find his parents had signed up to an equity release scheme when in their 80s, even though his father knew he had a terminal illness. Leslie, 81, and Dorothy Henscoe, 82, lived only 18 months after the plan started.

The Henscoes chose a home reversion plan - where they 'sold' part of their home to an insurance company - in return for a lump sum of £10,000 and a regular income of £200 a month in 2002.

To pay for this plan, NPI Retirement Services took £68,728 equity in their bungalow on a retirement complex in Sutton Coldfield, West Midlands. But since the Henscoes died 18 months later, they received a total of only £13,600.

Daily Mail

Zagreus · #6 14-04-2004, 08:34

Thanks to all those who have replied/sent private messages.

Following suggestions on this site I did write to the Times and they contacted me within half an hour of receiving the email. Although they were very enthusiastic about publishing the letter its now a week later and it hasn't appeared.

I must say that nothing I have read leads me to be very hopeful that NPI will relent. It sticks in my throat that this organisation goes by the name of NPI Retirement Services. Since when did taking the life savings of retired people become classed as a service?

Unfortunately for NPI I do not intend to simply shut up and go away. . .

Zagreus

Zagreus · #7 19-04-2004, 12:07

In an update to my last posting - the Times did publish my letter on Saturday (17th April).

I have already had an overwhelming response, both email and normal post. I have clearly touched a concern held by a lot of people. A high proportion want me to mount a campaign for regulation of these schemes at government level and this is something I will seriously consider.

As for NPI, they are apparently loathe to talk to me. They now claim to have never received the letter written by my mother giving me full authority to act on her behalf.... so she's written another one. This was over a week ago and so far there has been no acknowledgment!

Can I just make sure people are aware that although NPI In-Retirement Services is not currently accepting new business (what does that tell you?!), it is part of a group of companies who presumably offer similar schemes.

To that end I would desperately urge EVERYONE considering such a scheme to treat products from the following companies with extreme caution.

HHG Life Services Marketing Group
UKLS Financial Services Ltd
NPI Ltd
National Provident Life Ltd
NPI Investment Managers Ltd
NPI Portfolio Managers Ltd
London Life Ltd
London Life Linked Assurances Ltd
Pearl Assurance plc
Pearl Assurance (Unit Funds) Ltd
Pearl Assurance (Unit Linked Pensions) Ltd
Pearl Unit Trusts Ltd
Pearl ISA Ltd
Pearl GI Ltd
AMP (in all its guises)

PLEASE do not do anything without professional advice - and preferably from more than one source (solicitor, bank manager, financial consultant, CAB). Please discuss your intentions with your relatives and ask if they may sit in on any meetings with prospective scheme reps. If the company is unwilling - don't touch their product!

If anyone reading this works for those companies - let your employers know!

**Editor** · #8 19-04-2004, 12:30

Thanks for keeping us informed, Zagreus.

AMP has demerged its UK companies. London Life, NPI and Pearl are now part of the Life Services division HHG plc.

Details

**Editor** · #9 19-04-2004, 12:36

Iniquity of an equity release scheme

Sir, I read with great interest the letter from the Director General of the Association of British Insurers and others (April 5) calling for the regulation of home reversion plans.

My father passed away four weeks ago and I have been gradually sorting out all the legal and financial implications for my mother. In the process I have come across the paperwork for the capital release scheme they undertook four years ago, to buy a car and help put my niece through university.

It makes for truly appalling reading. Up to the point of my father’s death my parents had received less than £25,000 and yet for that amount of money the company which runs the scheme will get 75 per cent of its market value (currently about £185,000) when the house is sold.

My mother, who is 80, continues to receive £100 per month for life, but this isn’t index-linked.

My parents’ solicitor had advised them against the scheme but they desperately wanted to help my niece following the death of my sister.

How on earth did we allow such schemes to become legal? Clearly more publicity is needed to raise awareness among vulnerable elderly people as to their true cost.

Yours faithfully,
N. JOHN SPIERS,
2 Joiners Close,
Ley Hill, Chesham,
Buckinghamshire HP5 1YE.
nspiers@london.newsquest.co.uk
April 6.

Zagreus · #10 17-05-2004, 13:24

I wrote to senior staff at NPI two weeks ago asking for answers to concerns that I have.

So far I have not even received acknowledgement of my letter - YET AGAIN!!!

The arrogance of this company is truly breathtaking! Just who the hell do they think they are? What gives them the right to take all that money and feel they don't have to respond to the legitimate concerns of their customers?

Remember to check if any company you plan to invest with is part of the HHG Group - and then think again if this is the sort of service / practice you find acceptable

Zagreus · #11 14-06-2004, 09:05

Finally heard back from NPI who answered the points in my letter which they chose to answer but ignored the ones which were too uncomfortable for them...

Basically their letter explains how wrong I am to have such a low opionion of their company and its products and how terribly misrepresented they have been in the press over recent months (everybody say "Ahhh"!)

It seems that on the eighth day, God created NPI with the express purpose of giving free money to pensioners. The company only exists for altruistic purposes and if people only knew how expensive it was to maintain these schemes they would get down on their knees in thanks for such philanthropic generosity..... No - I don't believe it either!

Basically, how dare I question the profit NPI stand to make when as a beneficiary of my mother's will I stand to make a profit on the increase in house price too. So on top of everything else they have now personally insulted me.

They aren't concerned with the fact that my father increased the "loan" last year even though he was already dying from cancer, or that he had not fully discussed the scheme with the rest of the family.

Their whole attitude seems to be - "We've got our bit plus the law on our side so shove off, pal"

They seem to be unconcerned about bad publicity and appear to display utter contempt for customers, customers' families and potential customers alike. It seems to me that because they are operating under so many different names, they think any mud which sticks to NPI won't matter. The public will not make the connection to the other company titles and products so they're not bothered.

The only thing I have secured is that they will not levy a monthly charge of 4% until the property is sold after my mother has passed away. Mind you, that's what they state now and nothing in my dealings so far encourages me to trust them.