FCA urges later life lending as fourth retirement pillar
Emad Aladhal, director of retail banking at the Financial Conduct Authority (FCA), called for later life lending to become a 'fourth pillar' of retirement funding. Speaking at the Later Life Lending Summit, Aladhal emphasized the need for industry to build trust and innovate products.
Housing wealth: The untapped pillar
FCA Director Emad Aladhal highlighted a growing problem: 15 million working-age adults face a retirement income shortfall, according to the Pensions Commission.
Despite this, housing wealth, often a significant asset, is rarely considered alongside pensions, SIPPs, and ISAs as a primary funding source.
Research by Fairer Finance suggests that by 2040, 51 percent of households aged 60 and over, holding an estimated £4.3 trillion in housing wealth, could benefit from later life lending.
This could unlock around £23 billion annually, far exceeding today's market.
Aladhal stressed that later life lending should transition from a niche to a mainstream component of financial resilience planning, addressing both necessity and strategic choices like home improvements or estate management.
Market not yet ready for scale
Despite the clear opportunity, the later life lending market is not yet positioned for scale.
FCA data from 2025 shows that only 9 percent of the almost 330,000 mortgages advanced to over-55s were lifetime mortgages or retirement interest-only products, totaling around 30,000 contracts.
This reflects challenges in both supply, where current engagement levels are insufficient for future demand, and demand, where consumers often engage only under financial pressure.
Aladhal urged the industry to adapt, developing products that meet real needs and exploring alternative funding models beyond bulk annuity capital, such as securitisation and forward flow arrangements, to foster innovation and choice.
Industry's moment to step forward
The FCA's vision for later life lending as a fourth retirement pillar hinges on the industry's proactive engagement.
Despite regulatory support and ongoing market studies, the sector must independently build consumer trust, innovate products, and deliver holistic advice.
This is a clear call to action for the industry to shape its future, rather than waiting for external forces.