Article date: 30 March 2005
Built-in Inheritance Protection and House PriceInflation Guarantees
Norwich Union is to launch the Norwich UnionHome Reversion Plan on 6 April 2005. This new product willcomplement the company’s lifetime mortgage product, where itis market leader.
Home reversion plans enable older homeowners toraise cash from their home by selling all, or a share, of theirproperty. As with a lifetime mortgage, the customer can remain intheir home and there are no repayments to make. Home reversionplans could appeal to customers who need more cash than isavailable to them with a lifetime mortgage, or who want toguarantee a share of the property remains when the plan ends, andcan be left as an inheritance.
The plan has been developed through apartnership with Grainger Trust plc, the UK’s largest quotedresidential property investor, and has been designed to:
- Allow customers to release more cash from their home thanthrough a lifetime mortgage
- Provide an Inheritance Protection Guarantee - designed toprotect the value of the customer’s estate in the event ofthe plan ending through death in the plan’s first fouryears. The guarantee will also apply if the customer requireslong-term care in the first four years
- Provide a House Price Inflation Guarantee - a guarantee thatthe customer will still benefit from high rises in the value oftheir property
- Allow customers to sell up to 100% of the value of their home,and remain living there for the rest of their life. Alternatively,the customer can sell a proportion of their home and ensure that ashare of the property remains within their estate
The Norwich Union Home Reversion Plan will besold only on a fully-advised basis through FSA-regulated IFAs andmortgage intermediaries, and directly to consumers through NorwichUnion’s fully-regulated financial consultants.
Home reversion plans are not regulated by theFSA under mortgage regulation introduced in 2004. However, theTreasury has announced that these will be regulated in the future,which Norwich Union supports. The Norwich Union Home Reversion Planhas been developed to comply with the Safe Home Income Plans (SHIP)voluntary code of conduct for home reversion plans.
Mark Kelly, director of Norwich Union PersonalFinance, said: "Launching this plan is an important development inthe equity release market as there has not been a major productprovider in the reversion market for several years.
"Our research shows that some customers find areversion plan to be a simpler proposition that might be moresuitable for their needs than a lifetime mortgage. This isparticularly the case if customers want to guarantee aninheritance, or need to release a larger amount of cash. To givecustomers reassurance we have also built in an InheritanceProtection Guarantee and a House Price Inflation Guarantee
"This new plan follows the SHIP code of conductfor reversion schemes and we fully support the commitment from theFSA to regulate home reversion plans."
Press office contacts:
David Gwyer 01904452828 Out of hours 07800 699508
James Evans 01904 452791 Out of hours 07800 699525
Notes to editors
About the Norwich Union Home Reversion Plan
A homereversion plan enables a homeowner to sell part, or all, of theirhome in return for a cash lump sum payment. Customers retain theright to continue living in their home for the rest of their lifebut when the home is sold, the provider receives the sameproportion of the sale proceeds as originally sold to them by thehomeowner.
House Price Inflation Guarantee
Thisguarantees that the customer will still benefit from exceptionallyhigh house price inflation on the share of the property that theyhave sold to the reversion provider. If, when the property is sold,the price has risen more than 7.5% a year above inflation since thestart of the plan (based on the initial property valuation) thenthe reversion provider’s share of this excess is sharedequally between the customer/their estate and the reversionprovider.
Inheritance Protection Guarantee
Aninheritance protection guarantee has been built into the plan toreduce the cost in the event of death within the first four years.If the customer dies within 6 months of the plan being taken out,the guaranteed minimum payment under the guarantee is 90% of theopen market value of the reversion provider’s share of theproperty. The customer will receive a payment equal to theguaranteed minimum payment minus the cash payment they have alreadyreceived. The guaranteed minimum payment reduces as a share of theproperty over the duration of the loan.
Months 0-6 Guaranteed minimum payment 90% of property valuesold
Months 7-12 Guaranteed minimum payment 80% of property valuesold
Year 2 Guaranteed minimum payment 75% of property value sold
Year 3 Guaranteed minimum payment 65% of property value sold
Year 4 Guaranteed minimum payment 55% of property value sold
Year 5 onwards 0%
The guarantee will be calculated on the value ofthe property at the start of the plan or at the end of the planwhichever is the lower
Norwich Union is the market leading lifetimemortgage provider with a market share of 41.5% (Source: Safe HomeIncome Plans Q4 2004).
Full written terms and conditions are availableon request. Norwich Union is the UK's largest insurer. It is theUK's largest provider of life, pensions and investment products andone of the leading IFA providers. IFAs provide around 75% of thecompany's long-term savings business in the UK.
- Norwich Union has strategic alliances with building societiesand other leading UK brand names including Tesco PersonalFinance and The Royal Bank of Scotland Group. Norwich Union'snews releases and a selection of images are available fromAviva's internet press centre at www.aviva.com/media
- Norwich Union Equity Release Limited No 3286484. Registered at 2Rougier Street, York, YO90 1UU. Authorised and regulated by theFinancial Services Authority for lifetime mortgages. Homereversion plans are not regulated by the Financial ServicesAuthority.