Regulation of Financial Services (Land Transactions) Bill

I refute that suggestion. These measures are supported by the organisations that sell the products, and by consumers. Surely we have a responsibility to protect consumers, particularly vulnerable consumers, many of whom are older people. They require protection from the FSA. The hon. Gentleman is out of touch if he regards the measure as an example of over-regulation. There is a consensus that it is effective and sensible. On 17 May in The Financial Times, Jon King, the chairman of Safe Home Income Plans, whose members include the vast majority of home reversion lenders, said:"““I‘m delighted this has come so soon. People should now feel safe that these schemes are worth considering. Regulation means that people will be compensated if sold the wrong plan.””" Jon King is far more in touch with these issues than the hon. Gentleman. Hon Members will find it useful if I take a moment to clarify what home reversion plans do. At base they are simply a form of equity release scheme—financial products that allow home owners to release the value of their property above any amount over the mortgage. Equity release schemes involve a provider giving the home owner a lump sum, income or both on the basis of the value of the home, while allowing home owners the right to continue to live in the property. Providers receive their returns when that home is sold. These schemes are generally sold to the over-60s and they provide a valuable means for pensioners, who may be cash poor, to realise some of the value that they have locked up in their homes and so improve their standard of living. The products are not simple to understand. Realising a cash lump sum or income by equity release can have complex implications for pensioners’ tax and benefit situation. Hence the need for regulation to ensure that potential purchasers of equity release schemes receive an appropriate level of advice. There are two basic types of scheme: mortgage-based schemes or lifetime mortgages, and reversion plans. The clear difference between the two is that in mortgage-based schemes the householder retains ownership of the property whereas in reversion plans the reversion provider becomes the owner of whatever proportion of the property is sold. In mortgage-based equity release schemes, also called lifetime mortgages, home owners take out a loan secured on their property, but with the interest on that loan becoming payable when the house is finally sold, either on death or when the owners move into long-term care. These products are currently regulated by the FSA. In a home reversion plan, home owners sell all or part of their house at a discounted rate in return for a lump sum and/or income, and continue to live in the house rent free or for a peppercorn rent for life. The amount paid to the house owner is based on a number of factors, including the value of the property, the proportion of the property sold, the life expectancy of the owner, long-term interest rates and expected house price inflation. These plans are not currently registered by the FSA. The other products that the legislation is designed to bring within the scope of regulation are ijara home finance products. These are two main types of home finance products in the United Kingdom.