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One of the country’s leading charities has come under the spotlight for making money by referring elderly people to a commercial partner that routinely recommends equity release deals from its own parent company.
Age UK sends users through its commercial arm to an equity release advice service provided by Hub Financial. Hub is owned by Just, one of the biggest providers of equity release mortgages.
Age UK pockets commission of up to 0.75pc of the loan value from this relationship each time someone releases cash from their property. The commission from each deal can earn it thousands of pounds.
Hub customers are told that it compares a selection of deals from five providers: Aviva, Bridgewater, Legal & General, OneFamily and Just. While it makes clear that it offers only a selection of the plans sold by these firms, Telegraph Money can disclose that the way its advice process is structured means that in most cases a customer will be offered a deal by just one panel member – Just.
This raises questions about whether customers are being offered the most appropriate deal and provider. When advising customers, Hub’s staff follow a methodology that prompts them to offer Just deals for the most common consumer needs.
The only instances in which a customer will not be offered a plan from Just are for loans of less than £30,000 where the interest is paid each month, plans with variable interest rates, or other cases that the firm does not accept. Hub does not tell customers which specific loans are compared or excluded, making it difficult to know whether a given provider offers a better deal elsewhere.
Dean Buckner, an equity release expert formerly of the Bank of England, said: “Age UK could be earning a kickback worth thousands.”
Hub said it is regulated by the City watchdog, the Financial Conduct Authority (FCA), and its panel is reviewed quarterly. It said many plans across the market were considered before a limited number are selected for the panel.
It said: “The panel at any point reflects the attractiveness and competitiveness of each loan’s design, features, rate and service levels.”
Hub said customers were offered plans on the basis of whether they were suitable both today and in the future. This could involve potential charges if a customer were to repay the loan early or if they were to release more cash later.
In 2016 Age UK was criticised by the Charity Commission for recommending an energy tariff, through a business partnership with E.On, which was not the cheapest available.
This led to the formation of its commercial arm, Age Co, although James Daley, of consumer campaign group Fairer Finance, said few users would recognise the difference. “I’ve always thought it is very dangerous for any charitable organisations to have exclusive ties,” he said.
“These kind of relationships will lead to people asking questions about whether it has the charitable mission at the heart of its commercial business.”
Mr Daley added: “Sometimes it doesn’t manage that tension very well. I still don’t think the balance is right.”
Taking out the wrong equity release plan can cost a customer thousands of pounds in the long run as interest charges are often compounded and unnecessary fees can be incurred.
Equity release is growing rapidly. Data from the Equity Release Council, the industry lobby group, shows that £936m of property wealth was unlocked in the first three months of 2019, 8pc more than last year. Those releasing cash in a lump sum typically take £98,000 from their home.
Many will turn to Age UK as a trusted source of information. Since Telegraph Money began its investigation, the charity has withdrawn marketing material that failed to make clear the distinction between its charitable and commercial operations.
Kevin Dowd, a professor of finance and economics at Durham University, said there were problems with the quality of advice in the equity release industry as a whole.
“There seems to be a rather cosy relationship between Age, Hub and Just,” he said. “Age UK is using its commercial arm to make money from vulnerable people.”
When asked by this newspaper, Hub and Age UK repeatedly refused to disclose what percentage of customers ultimately took out a Just loan, citing commercial confidentiality.
Though Age earns commission of up to 0.75pc of the sum released by homeowners, it would not reveal how much money it makes from equity release in total.
However, its website boasts that it expects to raise £3m from its commercial activities, including funeral plans and insurance, this year.
Age UK said the commission from the sale of equity release was used to support charitable work. A spokesman for the charity said it had “no concern” about the percentage of customers offered a Just plan.
“Our view is that Just is relatively successful because it offers products that are a good match for the needs of many of our particular customers,” he said.
Age UK said it monitored the service provided by Hub and regularly sought feedback from customers. It said any complaints were investigated, but admitted that it had no say on the make-up of Hub’s panel or the selection methodology.
Stephen Lowe of Just said: “We have reviewed in detail the challenges presented to us and have not identified any service failure.”
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adam.williams@Finance.co.uk
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