27 September 2023

The cost-of-living crisis is increasing vulnerability in the over 50s

By LiveMore

LiveMore’s recent homeowner survey found that 32% of people aged 50 to 79 consider themselves to be vulnerable, with money and health being the key factors.

The most common reason, cited by 47% of respondents, was because they had little or no savings, while 35% said it was due to the burden of bills and credit commitments. Meanwhile, 37% pointed to poor health, 32% had mental health issues and 23% had a physical disability.

A quote from one lady demonstrated just how the cost-of-living has exacerbated issues for those who are vulnerable: “Last year I had my shopping delivered by Tesco, but now my daughter takes me to Aldi. I’m in my 90s and not as strong as I used to be, so I’d rather stay home and have the groceries delivered, especially in the winter, but I don’t have a choice.”

What does the FCA say?

The FCA defines a vulnerable customer as “someone who, due to their personal circumstances, is especially susceptible to harm - particularly when a firm is not acting with appropriate levels of care”.

Advisors must have a greater awareness of customer vulnerability so they can provide ‘good outcomes’ – a key element of Consumer Duty. The FCA is keen to ensure financial services firms take this seriously, which is why vulnerability is a key focus in the new Consumer Duty rules.

Affordability assessment for older borrowers

A key consideration when dealing with a vulnerable client is ensuring that they not only receive the product that is right for them, but that they understand it.

With older borrowers, advisers should always start with a thorough affordability assessment of all income and expenditure before even considering any of the options available.

Lifetime mortgages should not be the ‘go to’ choice just because a homeowner is in their 60s, 70s, 80s or even 90s. Other types of mortgages including repayment, interest only and retirement interest only, are often more suitable and cheaper in the long run.

Ongoing customer care

Once the mortgage is completed, that is not the end of the story. Throughout the lifetime of a mortgage, especially as people age, their circumstances may change.

So LiveMore ask intermediaries to make a customer care call once a year to check everything is alright and the product is still suitable. As an incentive we offer an annual Ongoing Customer Care Fee of 0.13% for up to 15 years.

Good outcomes and avoiding foreseeable harm should be top of mind for everyone involved in helping customers with their finances, whether they are vulnerable or not.

How can we help vulnerable people?

  • Review your vulnerability policy – With the cost-of-living having an impact on many borrowers, it’s worth brushing up on the FCA’s guidance and reviewing your policies
  • Consider creative solutions – The much-demonised interest only mortgage has provided a lifeline for LiveMore customers and can be a useful tool in reducing monthly outgoings. Read our recent white paper to find out more
  • Always carry out affordability assessments – If you deal with vulnerable clients, it’s imperative that they get the right advice. In the case of older borrowers that’s checking first whether they can make payments towards a mortgage before defaulting to equity release. Our affordability calculator does the heavy lifting for you.

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.