FSE Glasgow 2016 – Johnny Timpson
Timpson said, “Working age welfare reform is affecting the very demographic taking advice from our industry – as the welfare reform pulls support, we need to plug that gap.”
Many of the welfare changes – such as cuts to child tax credits and housing benefit caps – could affect the financial situation of clients, but Timpson was especially concerned with changes to the mortgage interest benefits available.
Under the current system, to be eligible for the mortgage interest benefit a claimant must be in receipt of either Jobseeker’s Allowance or Employment and Support Allowance, and must wait 13 weeks after claiming benefits to receive support for their mortgage payments.
However, under welfare reform, from April 2016 claimants must wait 39 weeks before receiving support – and, after April 2018, the benefits received will be in the form of a charge on the property and will be repayable. Timpson noted here that placing a charge on the property ‘called into question the advice component’.
Timpson urged financial advisers to help their clients think about the potential repercussions of being unable to pay their mortgage, adding that advisers were already perfectly placed to have these conversations with their mortgage clients.
He said:
“Please think about adding mortgage protection planning to your agenda with your clients – support from the state is limited, conditional, and changing.”
He stressed the importance of educating clients, citing the 7 Families scheme as an effective way to show consumers the real impact of health or employment events that would affect their income. He also suggested advisers work under the FCA’s guidance on social media use and make the most of the social aspect of online interaction with clients, adding “Rules are there [for social media] from the regulator, and we can work within them to reach out to clients”.
When facing what Timpson said UK charity Shelter had called ‘the most fundamental change to mortgage welfare support in 80 years’, he was clear in his message. He urged advisers:
“Review your client’s mortgage protection needs – and, especially if they have young children, are separated, are divorced, or are cohabiting, this is crucial.”
