Publication of first project paper
The 7 partners of the iff led EU-funded project on equity release schemes (ERS) ”Integrating residential property with private pensions in the EU” which is running until September 2017, have published their first paper as output of its first work-stream identifying the fundamental drivers for equity release.
Pensions and Housing Wealth – Quantitative Data on Market Conditions for Equity Release Schemes in the EU
Led by the University of Rostock together with LUMSA University, the paper ”Pensions and housing wealth: Quantitative data on market conditions for equity release schemes in the EU” identifies the need for complementary private pensions provided by ERS, the feasibility of ERS given the current market situation, and the extent to which these both match. The results will help to identify which of the Member States beyond the six investigated in detail will be most closely targeted at the dissemination stage of the findings. The analysis differentiates between conditions of need and feasibility and is limited to those indicators for which quantitative data across countries are available. Countries with a high overlap of need and feasibility have favourable conditions for ERS.
Hennecke, Peter; Murro, Pierluigi; Neuberger, Doris; Palmisano, Flaviana; Thünen-Series of Applied Economic Theory, Working Paper No. 146: Pensions and housing wealth: Quantitative data on market conditions for equity release schemes in the EU, http://hdl.handle.net/10419/142706.
This paper examines the available data on market conditions for equity release schemes (ERS) in all EU member states to cluster Member States for subsequent extrapolation of the findings from six EU Member States (DE, IT, NL, IE, HU, and the UK) to the EU as a whole. It aggregates various indicators to an overall index for ERS need and feasibility, using equal weights for all indicators. A comparison of overall need and feasibility shows a very diverse situation in the six member states and the EU as a whole. Among the six member states, Netherlands and UK have favourable ERS conditions, Hungary, Ireland and Italy have (lower) medium ERS conditions, while Germany has unfavourable conditions. An extrapolation to the EU as a whole is feasible as the six countries are good proxies for EU wide diversity.
Keywords: Ageing, equity release, pensions, homeownership, housing, reverse mortgage
Comparing overall need (i.e. a potential demand due to demographic pressure, risk of poverty for the elderly and a pension gap) and feasibility indexes, we find a very diverse situation in the six member states and the EU as a whole. Among the six member states covered by the research team partners, we see that the Netherlands and UK have favourable ERS conditions; Hungary, Ireland and Italy have (lower) medium ERS conditions, while Germany has unfavourable conditions. An extrapolation to the EU as a whole is feasible as our six countries are good proxies for EU wide diversity. The current feasibility and need are not carved in stone, but could be improved with the right policy measures and the preliminary results call for care with interpretation (e.g. they are indicative only and results are based on relative measures, which quantify need and feasibility relative to the EU average and not on absolute measures or thresholds; overall scores are based on equal weights for all indicators; available data only show average values at the country level; and qualitative factors are not taken into account.
The quantitative results of the present paper provide only a framework for further work. The project team is undertaking work on Policy options and consumer and provider side of the ERS market before it aims to propose pathways for product solutions that could be acceptable across Europe. The paper’s results will thus be complemented with case studies for individual countries, qualitative analyses of demand-side conditions and quantitative as well as qualitative analyses of supply-side conditions of ERS in individual countries.
The research group’s first working paper on pensions and housing wealth can be downloaded here. A website for the project is under construction. See iff-News About the project in German
This project has received funding from the European Union’s EaSi Grant Programme under grant agreement No VS/2015/0218.