S.H.I.P. stands for Safe Home Income Plans and was founded in 1991 as a consequence of equity release schemes sold mainly during 1988-1991 and the need to protect retired home owners.
Today SHIP members account for most schemes that are transacted in the UK. The majority of equity release scheme providers (not advisers) are members of SHIP including the major equity release companies that are often featured in the media.
The SHIP Code of Conduct is fundamental to its core proposition of protecting customers and treating them fairly. The Code of Conduct is a robustly enforced set of principles that members must adhere to in order to retain membership, the essence of these rules are;
- Homeowners must be allowed to remain in their property whilst it remains their main residence.
- Lifetime Mortgages and Home Reversions must be simply and fairly described so they are easily understood and all of the advantages and disadvantages should be made clear. Total client costs and tax considerations should be outlined together with the implications of moving home, the consequence of property price changes and how this relates to lifetime mortgages.
- Homeowners must have the facility to move their Lifetime Mortgage or Home Reversion scheme to an alternative property without penalty.
- Customers must have freedom to choose their own solicitor for the legal aspects. The SHIP member must provide the solicitor with full details of the scheme so the solicitor can sign a certificate only when satisfied their client totally comprehends the risks as well as the advantages.
- The SHIP certificate signed by the solicitor confirms that their customer completely understands all the essential facts about their Lifetime Mortgage or Home Reversion Plan including the risks and the effect it will have on their assets that would be left to their beneficiaries.
- All Lifetime Mortgages and Home Reversion schemes issued by SHIP member must have a no negative equity guarantee that the client will never owe more than their home is worth and their estate will never incur any liability.
The Ship rules provide a further layer of treating customers fairly in addition to stringent F.S.A. regulations imposed on equity release scheme companies and the advisers that recommend them. This triple level of customer safeguards should ensure much greater confidence in Lifetime Mortgages and Home Reversions. Today the government appears to recognise the potential benefits of equity release in relation to the increasing burden on the state for pensions and long term care needs. The SHIP website is an excellent independent resource centre for researching equity release.
One particular aspect recommended by SHIP is to look at the equity release company Key Facts Illustration, which your advisor is obliged to acquire when obtaining a personal quotation for you. This shows the effect of your loan interest rate when it is added to the original advance. Alternatively, if you are considering a home reversion scheme, the quotation will illustrate how much of your home you have sold in percentage terms. Also SHIP advises you to consider the long-term impact of house price inflation if values increase or decrease. In this context it would certainly seem helpful if you had access to calculators that illustrate the position of your equity release loan in relation to your various estimates of future house price values. Also it could be extremely useful to compare an equity release lifetime mortgage with a home reversion plan on a like for like performance basis.