Norwich Union is to launch the Norwich Union Home Reversion Plan on 6 April 2005. This new product will complement the company’s lifetime mortgage product, where it is market leader.
Built-in Inheritance Protection and House Price Inflation Guarantees
Norwich Union is to launch the Norwich Union Home Reversion Plan on 6 April 2005. This new product will complement the company’s lifetime mortgage product, where it is market leader.
Home reversion plans enable older homeowners to raise cash from their home by selling all, or a share, of their property. As with a lifetime mortgage, the customer can remain in their home and there are no repayments to make. Home reversion plans could appeal to customers who need more cash than is available to them with a lifetime mortgage, or who want to guarantee a share of the property remains when the plan ends, and can be left as an inheritance.
The plan has been developed through a partnership with Grainger Trust plc, the UK’s largest quoted residential property investor, and has been designed to:
- Allow customers to release more cash from their home than through a lifetime mortgage
- Provide an Inheritance Protection Guarantee - designed to protect the value of the customer’s estate in the event of the plan ending through death in the plan’s first four years. The guarantee will also apply if the customer requires long-term care in the first four years
- Provide a House Price Inflation Guarantee - a guarantee that the customer will still benefit from high rises in the value of their 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 a share of the property remains within their estate
The Norwich Union Home Reversion Plan will be sold only on a fully-advised basis through FSA-regulated IFAs and mortgage intermediaries, and directly to consumers through Norwich Union’s fully-regulated financial consultants.
Home reversion plans are not regulated by the FSA under mortgage regulation introduced in 2004. However, the Treasury has announced that these will be regulated in the future, which Norwich Union supports. The Norwich Union Home Reversion Plan has 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 Personal Finance, said: "Launching this plan is an important development in the equity release market as there has not been a major product provider in the reversion market for several years.
"Our research shows that some customers find a reversion plan to be a simpler proposition that might be more suitable for their needs than a lifetime mortgage. This is particularly the case if customers want to guarantee an inheritance, or need to release a larger amount of cash. To give customers reassurance we have also built in an Inheritance Protection Guarantee and a House Price Inflation Guarantee
"This new plan follows the SHIP code of conduct for reversion schemes and we fully support the commitment from the FSA to regulate home reversion plans."
-ends-
Press office contacts:
David Gwyer 01904 452828 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 home reversion plan enables a homeowner to sell part, or all, of their home in return for a cash lump sum payment. Customers retain the right to continue living in their home for the rest of their life but when the home is sold, the provider receives the same proportion of the sale proceeds as originally sold to them by the homeowner.
House Price Inflation Guarantee
This guarantees that the customer will still benefit from exceptionally high house price inflation on the share of the property that they have sold to the reversion provider. If, when the property is sold, the price has risen more than 7.5% a year above inflation since the start of the plan (based on the initial property valuation) then the reversion provider’s share of this excess is shared equally between the customer/their estate and the reversion provider.
Inheritance Protection Guarantee
An inheritance protection guarantee has been built into the plan to reduce 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 the open market value of the reversion provider’s share of the property. The customer will receive a payment equal to the guaranteed minimum payment minus the cash payment they have already received. The guaranteed minimum payment reduces as a share of the property over the duration of the loan.
Months 0-6 Guaranteed minimum payment 90% of property value sold
Months 7-12 Guaranteed minimum payment 80% of property value sold
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 of the property at the start of the plan or at the end of the plan whichever is the lower
Norwich Union is the market leading lifetime mortgage provider with a market share of 41.5% (Source: Safe Home Income Plans Q4 2004).
Full written terms and conditions are available on request. Norwich Union is the UK's largest insurer. It is the UK's largest provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 75% of the company's long-term savings business in the UK.
- Norwich Union has strategic alliances with building societies and other leading UK brand names including Tesco Personal Finance and The Royal Bank of Scotland Group. Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media
- Norwich Union Equity Release Limited No 3286484. Registered at 2 Rougier Street, York, YO90 1UU. Authorised and regulated by the Financial Services Authority for lifetime mortgages. Home reversion plans are not regulated by the Financial Services Authority.