Later life lending: building the fourth retirement pillar

Introduction

In the years ahead, housing wealth will become an increasing part of how many people provide for their retirement. But it continues to be seen as an option of last resort, if thought about at all.

Knowing I had this speech, as an experiment at a recent BBQ I had a conversation with my friends about retirement and savings – none of whom work in financial services. They talked about their employers’ pensions, SIPPs, ISAs, investments, and potential business ventures to supplement income in retirement. None brought up later life lending, or how they could use their home to help.

I don’t believe my friends are unique in this.

When consumers begin to consider their options for funding their retirement, they usually look to pensions: their state pension, workplace pensions, and personal pensions. The 3 pillars.

But why should it stop there? Why should retirement planning focus only on these 3 pillars, and not on all assets available to the consumer?

I am grateful for the opportunity to speak to you here today – you are the leaders from across the later life lending market, and through your actions the future of this market can be reshaped to meet the increasing needs of UK citizens. In this speech I want to deliver a simple message:

• There is an increasing generational and social need to provide greater funding in retirement.
• There is real opportunity to respond to this future demand by developing products people need, improving access to advice, and building trust.
• And the FCA will do its part to foster good outcomes for consumers and the appropriate growth of this market to meet future needs.

But you need to step forward. Because if you don’t, I expect others will step in to define that future.

A future where consumers think about their accumulated housing wealth as a fourth pillar for retirement funding, both by choice and necessity.

Why later life lending matters more now

The pressures facing future retirees are becoming harder to ignore.

There is growing recognition of a fundamental problem. Too many people are heading towards retirement without the income they will need to maintain their standard of living.

The Pensions Commission has found that 15 million working-age adults will not have the retirement income they aspire to[2].

People are living longer and working longer. But they may not fully appreciate their means and needs when they stop working.

More and more people will reach retirement without fully understanding the scale of the gap they may face.

And that may come as a shock when reality sets in.

But many of these people have made difficult budgetary decisions early in their working lives to buy their home and through that act achieve a sense of stability and long-term security.

Their home matters to them – and more so because it can also provide for their financial security in later life.

This is more than plugging a retirement income gap. For some, it can fund improvements that allow them to comfortably remain in their own home, or meet care needs. For others, it is a strategic choice to manage their estate, or gift to their family.

Fairer Finance research[3] suggests that by 2040, 51% of households aged 60 and over could benefit from accessing their housing wealth in retirement through later life lending. It is estimated that these consumers will hold around £4.3 trillion in housing wealth.

The same research estimates that it could unlock around £23 billion each year in today’s prices - many times bigger than today’s market.

That gives a sense of the scale of the opportunity. We should not be talking about it as a market niche, but becoming part of a much bigger, everyday conversation about achieving financial resilience in later life.

The market is not yet ready to deliver

But despite all of that, the market is not yet positioned to deliver at scale.

Our data shows that of the almost 330,000 mortgages advanced to over-55s in 2025, only 9% were lifetime mortgages or retirement interest-only products. That is only around 30,000 contracts last year.

I believe this reflects challenges in both supply and demand. 

Supply: The current engagement levels with the market suggest that it may not be ready to support the future demand. 

And that is a problem if we want to grow this market.

Demand: Too often, consumers engage only when they are under financial pressures, when they feel their options are limited. And advice is often not considering those options for retirees.

But that is not how this market should be seen. Later life lending needs to be something consumers consider early, openly, and with confidence as part of their long-term planning.

It won’t be for everyone. But for some, perhaps many, it is a viable and positive option.

Unless the market adapts, it will miss both the opportunity to grow the market demand and fail to meet genuine consumer need.

But how can you begin to build this fourth pillar now?

Products that meet real needs

The first building block is the products themselves.

If later life lending is to become the fourth pillar, the market cannot rely entirely on existing products and funding models to meet tomorrow’s needs.

We start from a position of strength – the UK financial services market is among the most innovative in the world.

This market has innovated to produce products that offer more protections, more flexibilities and more features.

Innovation does not automatically mean more value for consumers. Because it can sometimes mean greater complexity and cost.

The test is not whether products are more sophisticated. But whether they work better for consumers, helping them achieve good outcomes.

Looking ahead, future retirees will have different needs and different levels of wealth. We should ask whether today’s baseline is still the right one.

But product design is only part of the picture. Funding matters too.

Unchallenged, bulk annuity capital is likely to remain the primary source of funding for decades to come.

But if we want more innovation and choice, we should ask what alternative funding can unlock, and how to grow it. That includes options such as securitisation and forward flow arrangements.

Building trust and the consumer journey

But access to products on its own will not solve the problem we are seeing in this market.

Good outcomes also depend on trust. Trust in the product, trust in the adviser, and above all, trust in the result.

And that is where the consumer journey still falls short. Many consumers are unaware of later life lending as an option.

And for those who are, they are influenced by historic perceptions that continue to shape attitudes today. 

That raises some questions: What is the market doing today to actively change perceptions? What is it doing to engage consumers early in their financial planning?

If the underlying need is clear but take-up is still limited, we have to ask where the journey is breaking down.

Is it awareness? Is it trust? Or both?

Fragmented advice, poor outcomes

Where consumers do engage, they are not always supported to consider the full range of options available to them.

Instead, the market is in silos – set up for mortgages, pensions, investments and later life planning to play in different parts of the pitch. Advisers often don’t consider the full journey. Or most importantly, work together to achieve a holistic good outcome for the consumer.

But consumers do not live their lives in silos.

We want to see advice that supports informed, confident decision-making across all available options.

That means advisers looking across the whole consumer journey, not just part of the market. It means moving from product-led conversations to genuinely holistic ones.

We have seen some progress. Referral models are one example, and they matter.

But they should be a starting point, not the end game.

The challenge now is to be bolder. More ambitious. To think differently about how advice is structured, how expertise is shared, and how consumers are supported to reach better outcomes.

We share the market’s vision for more holistic advice

But what does this actually look like in practice? How far can we push the boundaries of advice?

This is not just about removing barriers to holistic advice but also exploring the opportunities to deliver it. 

The role of technology

Lasting change will depend on the choices the industry makes.

On product design, on advice, and on the confidence it gives consumers to engage earlier and more openly with their options.

Technology will have a key role to play.

As director of retail banking, I can already see innovation in areas like blockchain and AI beginning to reshape the banking sector. How payments are made, how contracts are executed, and even how homes are bought and sold.

AI and data-driven tools are already beginning to reshape advice, sourcing and decision-making.

Used well, they could support earlier engagement, help consumers navigate complex decisions, and enable more consistent support across the market.

We should be asking now what changes like these could mean for this market. We should not wait for innovation to happen elsewhere first before bringing it forward here too.

Because as technology evolves, this market will need to evolve with it.

The FCA is doing its part – are you?

And the market has already shown that it can evolve.

Standards are much stronger than they once were. The work of the Equity Release Council has played an important part in that progress. Advisers have the expertise to guide consumers.

The challenge now is not proving that better outcomes are possible. It is making them easier to deliver at scale. 

The FCA is doing its part. One of our priorities is to help consumers navigate their financial lives, and that includes how they use the assets they hold.

We are already making changes. We are consulting[4] on retirement interest-only affordability, because we believe this product could play a larger role.

This summer, we will hold workshops to help explore what it would take to make more holistic advice a reality. We are ready to listen. So come and talk to us. 

And we are conducting our focused market study[5] on the later life mortgage market. To examine whether change is needed to enable this sector to meet consumers’ changing needs, driven by effective competition.

Our market study is looking at:

• How the market is meeting needs, innovating and funding to help build scale.
• How consumers move through the market. How they navigate between mainstream and later life options. And where the current system may be falling short.

On completion of the market study, we will push forward changes identified that help support a market that works better for consumers and is trusted, responsible and scalable.

Regulation has a role to play in addressing some of the barriers. But it can only take the market so far.

You – the later life sector – bring something important to the table: deep product expertise, a strong understanding of later life needs and vulnerabilities, and a real focus on outcomes.

That means you are well placed to help shape what the fourth pillar of retirement funding becomes in practice.

We want to work with you to support a better future market.

If we get this right, the prize is much bigger than market growth alone.

It is a future where more consumers can approach later life with confidence and control over the choices available to them.

The opportunity here is clear. Step forward.