Not upheld: suitability of equity release product / fairness of terms and interest rates complaint against ReAssure Limited

Decision detail

Summary

The Executor of Mrs P's estate complained that an equity release income plan sold to Mrs P in 2000 was unsuitable and had unfair terms, particularly regarding the interest rate charged and the annuity value relative to the property value. Mrs P was a 67-year-old widow with insufficient income, depleted savings, and unsecured debts who needed both a lump sum and additional income. The ombudsman found the product was suitable given Mrs P's circumstances and limited alternatives, and that the 8.5% interest rate and annuity terms were fair and in line with 2000 market practice. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman assessed the suitability of the product in the context of 2000, not by current standards. Mrs P had limited options given her age, income, and circumstances. Traditional mortgages or loans would have been unlikely. The alternatives she rejected (downsizing, lodgers, family assistance, assisted living) were genuinely unsuitable for her. Equity release was the only viable option to access her home equity. The 8.5% interest rate was in line with market practice for equity release products in 2000 (compared to 6% for traditional mortgages). The annuity providing less than its cost is not unusual for lifetime annuities and was disclosed. The plan met both her objectives: providing a lump sum and guaranteed income.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website