If you are a UK homeowner considering your options in retirement, you may be wondering, is equity release safe in 2025?

As with any financial decision, it is incredibly important to do the necessary research before committing yourself to anything.

As the over 93,400 UK residents who unlocked equity in 2022¹ no doubt know, it can take a great deal of work to make sure you are choosing the right solution for your individual needs.

The good news is that you do not need to start from scratch.

At SovereignBoss, our research team has spent countless hours reviewing the latest equity release news and information and putting it all together in an easy-to-use format.

What is equity release in the UK and how is it kept safe? Who regulates it? We have put all that information together for you in this handy guide.

Read on to learn more.

What Is Equity Release?

Equity release offers a flexible way for homeowners to tap into their home's value without having to move.

Imagine you're 55 or older and considering how to fund your retirement; equity release could be a viable option.

It's essentially turning the equity built up in your home into accessible cash, which can be used for various purposes, from supplementing retirement income to home improvements.

For example, with a lifetime mortgage, part of the equity release schemes explained, you retain home ownership and don't repay anything until the home is sold, usually when you pass away or move into long-term care.

Is Taking Out Equity Release a Secure Option?

Equity release can be safe if you choose a product from a reputable provider and understand the terms and risks involved.

It's essential to consider the following to ensure safety:

• Regulation: Choose a provider that is regulated by a financial authority, like the Financial Conduct Authority (FCA) in the UK.
• No Negative Equity Guarantee: Ensure the plan includes this guarantee, so you or your estate won't owe more than the value of your home when it's sold.
• Professional Advice: Seek independent financial and legal advice to understand the impact on your estate and eligibility for means-tested benefits.
• Interest Rates: Be aware of the interest rates and how they will affect the amount owed over time.

While it can be a safe option for some, it's crucial to fully understand the long-term impact on your finances and inheritance.

What is the Financial Conduct Authority (FCA)?

The Financial Conduct Authority (FCA) is a regulatory body in the United Kingdom that oversees the conduct of more than 50,000 financial services firms and financial markets.²

Established in 2013, the FCA replaced the Financial Services Authority (FSA) as part of a broader restructuring of the country's financial regulatory framework. 

The FCA's objectives are to ensure that the UK's financial markets are able to operate effectively and to promote competition that is beneficial to consumers.

Where Does the Financial Conduct Authority Operate?

The FCA operates across the whole of the United Kingdom, overseeing firms and businesses that provide financial services or promote financial products (shares, bonds, etc.) to UK consumers.

Additionally... 

The FCA's reach extends from high street banks and credit companies to new fintech start-ups, and it also monitors the infrastructure supporting these firms, such as traders and brokers.

What Are the Main Objectives of the FCA?

The FCA has three operational objectives³ in support of its overarching strategic objective, which is to ensure that the relevant markets function well. 

These operational objectives include:

• To protect consumers - ensuring that consumers are provided with appropriate products and services and that their rights are protected.
• To protect financial markets - ensuring that the financial markets operate transparently and fairly.
• To promote competition - ensuring that financial markets are competitive, which in turn can lead to better products, better prices, and more choices for consumers. 

It is also worth noting that the FCA works closely with other regulatory bodies to achieve its objectives and ensure stability in the global financial system.

What Powers Does the Financial Conduct Authority Have?

The FCA has been granted a variety of powers to fulfill its mandate, including the ability to set minimum standards and place requirements on products. 

It can investigate organisations and individuals, and if necessary, it can ban financial products for up to a year whilst considering an indefinite ban. 

Additionally...

It can direct firms to promptly amend or withdraw misleading promotions and can seek unlimited fines and restitution orders through the courts.

How is the Financial Conduct Authority Financed?

The FCA is funded by fees and levies from the firms it regulates,⁴ rather than from public (government) funding. 

Each year

The FCA publishes its annual funding requirement (the total amount it needs to raise from firms to cover its operational costs) and this is divided amongst the firms it regulates. 

Larger, more complex firms typically pay more towards the FCA's costs than smaller, simpler ones.

How Does the FCA Monitor Businesses and Deal with Allegations of Wrongdoing?

The FCA monitors businesses by initiating enforcement proceedings, conducting investigations, and taking disciplinary actions against firms or individuals when needed.

In general, the FCA operates a system of risk-based supervision. 

This ensures that its resources target issues and firms that pose the highest threat to its objectives. 

As part of this approach, the FCA frequently evaluates high-risk firms and conducts thematic reviews to gauge risks in specific sectors or across multiple firms.

This could involve:

• Public censures
• Fines
• Withdrawing a firm's authorisation
• Banning individuals from working in regulated financial services

By setting standards, investigating potential breaches, and taking necessary enforcement actions, the FCA helps to maintain confidence in the UK financial system.

How Does the FCA Regulate Equity Release?

The FCA plays a critical role in regulating equity release products and providers in the UK by setting out rules and guidelines which focus on fair treatment of customers, transparency of products, and clarity in communication.

Providers must clearly outline the costs, potential risks, and implications of equity release for the customer's circumstances. 

This includes the effect on your tax position, entitlement to state benefits, and the impact on your estate. 

Providers must also consider your needs, circumstances, and objectives during the advice process.

Lastly

As a consumer protection measure, only qualified advisers can recommend equity release products and must deem them suitable for the customer after considering all alternatives.

This includes advising the customer about inheritance protection, no negative equity guarantee, and other little-known truths about equity release.

How Can I Verify if a Financial Institution Is Authorised and Regulated by the FCA?

To verify if a financial institution is authorised and regulated by the FCA, you can visit the Financial Services Register on the FCA's website.⁵ 

This register offers details on firms, individuals, and entities either currently or previously regulated by the FCA and / or the Prudential Regulation Authority (PRA).⁶ 

It is important to make sure that any firm you deal with is authorised, as this provides you certain protections. 

If you engage with an unauthorised firm, you will not be eligible for the Financial Ombudsman Service⁷ or the Financial Services Compensation Scheme (FSCS)⁸ should issues arise.

FCA Contact Details

You can contact the FCA through various means. 

Here are some of the contact details:

• General inquiries: +44 (0)20 7066 1000 (Switchboard)
• Consumers helpline: 0800 111 6768 (freephone) or 0300 500 8082 from the UK, or +44 207 066 1000 from abroad.
• Postal Address: 12 Endeavour Square, London, E20 1JN, UK.

You can also fill out an online contact form on the FCA's website.

Before contacting the FCA, it is worth noting that they cannot provide advice or resolve individual complaints. 

Common Questions

In Conclusion

The Financial Conduct Authority stands as a cornerstone of the financial industry in the UK, providing robust regulation and oversight of a broad range of financial services and products, including equity release. 

It ensures that firms adhere to best practices and that consumers are treated fairly, transparently, and appropriately, fostering confidence in the financial markets. 

In an ever-evolving financial landscape, the FCA continues to adapt and respond to new challenges, underscoring its vital role in maintaining the integrity of the UK's financial sector. 

As consumers, knowing that the Financial Conduct Authority is looking out for our best interests offers peace of mind as we navigate our financial journeys.