Safe Home Income Plans (SHIPs) was a company brought in in 1991 to ensure that elderly people did not end up in financial difficulty in later life after investing in unsafe Equity Release schemes. SHIP schemes were brought in after the onset of a series of schemes in the late eighties which left many individuals out of pocket.
These schemes used equity released from the individual's home to invest into bonds and other investment schemes. Investors were only safe in these schemes when the market was in their favour, when it was not they were left in serious financial difficulties.
Individuals were affected by rising mortgage repayments, falling property prices and investment values falling. Many were left in a position where there could not afford their mortgage repayments, they had no income from their investment and in some serious cases had their homes repossessed and were left in negative equity - meaning they owed more to the bank than their home was worth. Quite clearly this was an unfair investment scheme to see to the public so schemes of this structure were banned in 1990.
SHIP regulated the sale of home income plans and equity release plans for a couple of decades and has now been swallowed up in part of the Equity Release Council, where it is still serving the same function but as part of a larger regulatory body. SHIP protects plan holders but does not offer any plans itself. SHIP is a body which purely provides a code of practice for companies operating in this area of finance. It is extremely advisable to ensure that the equity release plan you are taking out is with a company which is a member of SHIP. This is because SHIP members must:
1. Provide a "no negative equity" guarantee, which ensures you will never owe more than your property is worth.
2. Have to provide potential investors with an in depth description of their plan and the risks which are involved within it.
3. They must agree on a set payment schedule to suit their investor: be this a lump sum payment of equity to the investor, or staggered equity release payments.
4. Clear outlines of all payments must be given
5. Ensure a solicitor is instructed by the client to act on their behalf
6. Guarantee the client can still live in their home and has the freedom to move to a more suitable property if they need to in the future.
All these rules try to ensure that clients go in to equity release with their eyes wide open and completely understand the plan they are taking out. All individuals considering equity release should do their research and get some independent financial advice. Equity release is not for everyone and you may find that there is another option which suits your financial and personal situations more accurately.