Prudential has moved equity release into the mainstream for retirement planning with the launch of the Prudential Lifetime Mortgage (PLTM).
Bringing together two distinct plans within a single equity release wrapper, Prudential has unveiled a new Lump Sum plan as well as re-launching its multi-award winning Drawdown product, which has been renamed the Increasing Cash Reserve plan.
Through the introduction of a range of unique features, designed to provide greater flexibility and more closely meet the needs of customers in this growing market, Pru’s new lifetime mortgage addresses criticisms that the products currently available across the market are inflexible and do not take account of changes in lifestyles.
Keith Haggart, Business Director of Retirement Income, at Prudential says: “The equity release market has grown rapidly and is established as a reputable part of the financial services marketplace. However, it now needs to move on to a new level and offer products which adapt to the changing retirement landscape. We believe our new Lifetime Mortgage does that.”
The Prudential Lifetime Mortgage, which is available through intermediaries and direct to customers aged 55-plus, answers a key customer concern about leaving an inheritance through its unique Equity Guarantee option – a first for the UK market. This enables homeowners to guarantee an inheritance of either 10 or 20 per cent of their existing house value, without affecting the amount of equity they can release through the plan and not reducing the maximum loan to value.
In addition to the Increasing Cash Reserve plan, which is the only drawdown plan to automatically increase the loan amount available by 1 per cent each year, Prudential has launched a lump sum plan. This plan addresses a continuing customer need to access large, one-off lump sums.
As well as the Equity Guarantee option, customers can choose to apply a Maximum Release option to their chosen product. This option allows customers to borrow up to an extra 5 per cent of the property value. The maximum loan to value for drawdown is 35 per cent or 40 per cent for lump sum.
The Prudential Lifetime Mortgage has also introduced a more transparent approach to pricing. A menu-based approach means that the interest rate paid by the customer is based on the product and number of options selected as well as the value of their initial loan. This means that customers only pay for the flexibility they require.
Minimum loans from the Prudential Lifetime Mortgage will be £10,000 for drawdown and £20,000 for lump sums with a minimum property value of £100,000 for both products. However there are no maximum property values or maximum loan amount.
It is available to homeowners aged between 55 and 84. The amount a homeowner can release depends on their circumstances, including age, and the value of the property. The Drawdown plan allows them to release an initial sum, and then further funds (minimum of £3,000 applies) as required with the maximum amount to be released going up by 1 per cent each year (subject to limits). Alternatively, they can just release one single lump sum at the outset.
Keith Haggart, adds: “Equity release should be regarded as one of a range of options available to people planning for retirement and provide the flexibility associated with all other retirement planning products. Increasingly, very few people can rely purely on a pension to fund their retirement and there is a growing realisation of that fact among the 45-plus age range.Prudential’s Lifetime Mortgage will be one of the most flexible of all Drawdown products on the market allowing customers to withdraw money at any point during their retirement with no time limits on the availability of the reserve and no additional review. The introduction of the lump sum plan adds further accessibility to the product.”