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Solution For Ageing Asset Rich Cash Poor

Media release
19 May 2004


Solution For Ageing Asset Rich Cash Poor

A fast growing segment of New Zealand society is emerging: ageing asset rich cash poor Kiwis.

“These people own their own homes, but they can’t afford to enjoy their lives,” says Boyd Klap, chairman of Sentinel and recently established company which gives people over the age of 60 the option of releasing equity in their home.

“They can use the money for whatever they want – buy a new car, travel overseas, pay for private surgery or maybe just improve their standard of living.

In the eight weeks since Sentinel went public, more than 100 loans have been approved with a total value of well over $5 million.

“That’s clear evidence there’s a need for this kind of product,” Mr Klap says.

He says while he’s delighted the Lifetime Loan is such a commercial success, he is equally pleased by the fact it is proving socially beneficial.

For example, he says, one gentleman in Auckland said -- "I own a half million dollar house and I live like a pauper".

Another woman - a retired nurse, living in what she believed to be a house worth $200,000 - couldn't even afford to get her car fixed and after 12 years of retirement had run out of savings. She decided to get a Lifetime Loan of $40,000. She had her house valued as part of the process and found it was worth $400,000. so not only can she now live comfortably, she feels totally secure. "It was a dream come true" she said.

Home equity release products are not a new idea. As far back as The Todd Task Force - Private Provision for Retirement in 1992, HER schemes were highlighted as a possible solution to funding retirement.

The Task Force said "We do not view HEC (Home Equity Conversion) schemes as a total substitute for other forms of private retirement income. However, we do see a place for them in New Zealand. there is a large group of New Zealanders whose only sizable asset is their home. It is often the case for these people that National Superannuation is their only regular income. With the rate of National Superannuation, relative to wages, projected to fall over the next few years, and increased user charges beginning to take effect, we foresee increasing demand for HEC schemes"

Then in 1997, the Prime Ministerial Task Force on Positive Ageing, Facing the Future, found, "Home Equity Conversions are a market-based solution to the problems faced by some older home owners of being asset rich but income poor. ...The 1996 Coalition Agreement indicated that the Government intended to work with the private finance sector to develop a "Home Equity Scheme" for people solely reliant on New Zealand Superannuation".

And in 1998 a research report commissioned by the Office of the Retirement Commissioner into the prospects and potential of home equity conversion/equity release in New Zealand prepared by Judith Davey of Victoria University of Wellington which concluded, "HEC/ER has considerable potential in New Zealand given the country's current and likely future social, economic and policy environment".

At 77, a keen skier, tramper, travelers and gardener, Mr Klap says “If I had the choice of staring at four mortgage free walls and living life to the full, I know which choice I would make.”

Caption: Sentinel chairman Boyd Klap with grandchildren Marcella and Jakob Klap: “If I had the choice of staring at four mortgage free walls and living life to the full, I know which choice I would make.”


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