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Equity release mortgage plan
offer for the over 50s

PRUDENTIAL

PRU LAUNCHES THE NEXT GENERATION

OF LIFETIME MORTGAGE

New product offers unprecedented levels of flexibility and innovation

Prudential UK today launched its new industry-defining lifetime mortgage into a market in desperate need of true innovation. The new product is called the Prudential Property Value Release Plan and it’s different to competitors’ products because it offers:

· Unprecedented flexibility

For the first time, customers can take their money as they need at anytime during their retirement rather than in a single lump sum.

· Increasing loan to value

Customers can choose to access a unique increasing loan facility, which starts at 15 per cent of the property value at age 60 and rises by 1 per cent each year up to a maximum of 35 per cent.

· Greatly reduced compound interest

By including a flexible and unique draw down facility which allows customers to take a smaller initial sum followed by tranches of £5,000 or more at any time, customers will greatly reduce compound interest charges. Typical savings could be tens of thousands of pounds.

· Competitive interest rate and charges
The interest rate is fixed and there are no hidden charges, as they are all clearly and simply explained at the outset. The interest rate will be confirmed nearer the date of launch.

· Clear and simple guidelines on when the loan can be transferred or repaid

Customers can transfer the loan to other properties and in certain circumstances, such as when they move to a smaller property, can also repay part of the loan early, without penalty. In other situations an early repayment charge may apply.

Prudential’s Property Value Release Plan addresses the concerns recently expressed by the Financial Services Authority

Earlier this year, the FSA raised concerns over the way equity release schemes were sold, in particular the issue that customers were being encouraged to take the maximum they could at the outset (whether they needed the full amount or not) and investing the surplus cash in other investment products.

The guaranteed flexibility of Pru’s new product means that customers have no need to ‘borrow to invest’. They can draw down their money at any time so there is no reason for them to take it all up front unless they need to. Pru’s new lifetime mortgage gives the customer control – and in doing so, can save them tens of thousands of pounds.

Ali Crossley, Director of Lifetime Mortgages, Prudential UK, said:

“When you consider that more and more people are saying that they will struggle in retirement, it is not surprising that more and more are turning to property to supplement their pension.

"Despite this, there has not been much, if any, product innovation within the lifetime mortgage market. Most of the new and existing incumbents are simply offering ‘me too’ products. What’s missing from the market now is any flexibility and control for the customer. Existing schemes offer limited options regarding how and when you can take out money and very little flexibility if individuals’ circumstances change.

“Our new lifetime mortgage product will change this. It has been designed with the needs of customers and advisers at front of mind. Customers want flexibility and control. Advisers want a product that they feel confident to recommend and we’ve delivered it.”

The lifetime mortgage market presents a huge opportunity

Pru estimates that the lifetime mortgage market will rise to £6.9 billion advanced per annum by 2008. Pru’s recent research among advisers supports this:

· 91 per cent of advisers think people will use their home equity to supplement their retirement income

· 19 per cent think lifetime mortgage sales will grow faster than any other financial product

· 13 per cent say it is the main growth area for their business

Chief Executive, Prudential UK, Mark Wood, said:

“Our new lifetime mortgage sees us breaking away from the pack to offer the fairest solution for customers. It’s part of our overarching strategy to develop new and innovative products that transform existing markets. Just like PruHealth, where we injected life into the stagnant private medical insurance market, we plan to re-invigorate the lifetime mortgage market. We want Pru to be known for product innovation.

“The crucial thing for customers is that they are able to access a product that suits all their needs from a trustworthy provider. The Pru, as the UK’s biggest annuity provider, has vast experience of longevity and retirement needs, and is in a great position to offer an industry-defining product.”

Key dates for launch

Key Facts Illustrations for the new product will be available to IFAs from 29 August 2005 on www.pruadviser.co.uk.

The product will be available to customers from end-September 2005.

 

 

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