New Company Introduces Perfect Retirement Funding Option for New Zealanders
Sentinel, a new financial services company created by the founders and two former executive directors from assurance,
investment and home loan group Sovereign (Limitednow, part of ASB Bank Group)Limited, has launched their version of an
innovative retirement funding concept called a home equity release.
Known as the Lifetime Loan, the Sentinel product gives New Zealand home owners 60+ the ability to achieve greater more
enjoyment and greater financial security by creating the means to unlock the equity in their property without giving up
ownership of, or having to leave, their home.
According to Sentinel Managing Director Richard Coon, the Lifetime Loan offers people planning for, or in retirement, a
new funding option that repays their belief in the value of their home.
“New Zealanders love property. More than many other countries, home ownership is our most common form of significant
wealth-holding. By retirement, the majority of people have realised their dreams and live in homes they own outright.
“Despite this savings discipline and success, people ironically are caught in a situation of being housing rich and
income poor. We recognised that, if done in a way that safeguards people’stheir interests and assets, there could be no
retirement funding option better suited to this market than the one we’re offering through our Lifetime Loan,” he said.
Richard Coon says as early as 1998 a report to the Office of the Retirement Commissioner* identified this dilemma and
suggested the role of housing should be explored as a retirement funding option.
“It has taken us some time to finalise our plans for the Loan as we wanted to thoroughly research what the market
wanted- in summary a simple, easy to understand, good value product that did not expose them to undue risk. I think we
have achieved that through the structure and design process. As a result what we are delivering required to deliver is
perhaps one of the first true bancassurance products, combining both banking and life assurance, is of necessity very
complex” he said.
“The funds available”, says Richard Coon,” are based on the value of the house and the particular borrower’s age. Those
60 to 65 can borrow up to 10% of the value while those 90+ are able to borrow the ‘ceiling’ amount of 40% as long as
this is under $500,000. As they age they can borrow a higher percentage. and A Any change in the value of a home will be
taken into account forin for calculating eligibility for further advances.”
“Given that the loan is based on the equity built up in a person’s home”, says Richard Coon, “what the money is spent
on is up to each individual”..
Sentinel acknowledges that because this is your house the money you receive can be used for whatever you want, or need.
“Quite seriously the Lifetime Loan can be used Sentinel acknowledges that because this is your house the money you
receive can be used for whatever you want, or need. “Quite seriously the Lifetime Loan can be used for whatever a person
wants, or needs, including forhome improvements, buying a new car, taking a yearly holiday, paying for a special wish
like a grandchild’s university education or evenperhaps for an a sudden urgent operation in a private hospital
facility,” he said.
The borrower continues to own their home and benefits fully from future property appreciation. Interest ,Interest,
currently at 8.95%, is added to the loan and the accumulated balance repaid only on the eventual sale of the house,
normally following the borrower’s death or going into long-term care. “Any investment decision is a significant one that
people should make with their eyes wide open. Given the target market that is involved we’ve made doubly sure that those
in a position to give advice and guidance are actively involved,” he said.
The loan comes with a repayment guarantee which means that if ,if, for any reason, the net sale proceeds of the
property are less than the loan balance Sentinel makes up the difference, so there is no liability on the borrower or
their estate.
“The Lifetime Loan will be marketing ed”,the Lifetime Loan, says Richard Coon, “through independent financial
advisoersadvisors as well as ensuring the potential borrower’s family, accountants and ssolicitors and any other
adviserssolicitors are involved in any decision making.”
“Any investmentThis decision is a significant one that people should make with their eyes wide openonly after careful
consideration. Given the target market that is involved we’ve made doubly sure that those in a position to give advice
and guidance are actively involved,” he said.
The company is the ‘brain child’ of Sovereign creators and business drivers Chris Coon, Ian Hendry, Richard Coon and
Paul Bravo who left the organisation at various stages following its sale to ASB Bank Limited Group in 1998. who have
been appointed to the Board of Sentinel Ltd.
They are joined by financial services industry leader and retirement savings champion Boyd Klap as Chairman and
Nelson-based business advisor Bronwyn Monopoli as Director.
As well as the Lifetime Loan Sentinel is committed to looking at—and launching—other financial services products geared
to meet the changing needs of New Zealanders 60+.
* (Source: The prospects and potential of home equity conversions/equity release in New Zealand, Judith Davey,
Victoria University of Wellington, October 1998).
A BACKGROUNDER CAN BE DOWNLOADED AT: http://mediacom.nzpa.co.nz/attachments/2849_MD6922BACKGROUNDINFO.doc