Not all later life customers are in the same boat
Bob Hunt is chief executive of Paradigm Mortgage Services
If you were looking for evidence of a ‘top down’ approach within the UK economy then the recent research by Prudential into those people who are reaching retirement and the financial commitments they have to those near and dear to them, should certainly provide it.
We talk a lot in this industry about the ‘Bank of Mum & Dad’ and its importance to first-time buyers looking to get onto the ladder, but we sometimes forget that the support being provided to offspring is not just in terms of help with a deposit, but also across all manner of living costs, plus what about the ‘sandwich generation’ who are charged with providing not just for their children and grandchildren, but also their parents, even grandparents?
Prudential polled close to 10,000 non-retired adults aged 45-plus – which included 1,000 who plan to retire this year – and it’s obvious that the parental contribution to children, and others, is an ongoing concern and significant draw on financial resources. On average, pensioners (either as individuals or with a partner) are providing financial support to three people – mostly children and grandchildren but also those above them.
Of those planning to retire in 2018, the average person is providing £360 per month to their extended family, which means £4,320 per year after tax. One in five of those near-retirees say this amount regularly hits £500 a month, and as mentioned it’s not simply a deposit issue – although 22% said they have provided for this – but that money is also being used for ‘everyday living costs such as food and travel’, but also university education fees and living costs.
Now, you might very well argue that this generation – the Baby Boomers – have benefited considerably over the years from huge increases in house prices and a system that might well have gifted them free university education, support with their own mortgage, access to high deposit loans, a glut of properties to choose from when purchasing, access to the buy-to-let market on great terms, final salary pension schemes, and the like.
And, let’s face it, you wouldn’t be wrong – there are a number of people reaching retirement who have considerable assets, large pensions to look forward to, and are living in mortgage-free homes with significant equity in them. For that demographic, with all the benefits they’ve enjoyed, then supporting those around them in the nuclear family, should be no great shakes.
However, to suggest that all those in later life are in the same boat would be clearly wrong. What about those with small pension pots, or interest-only mortgages with no repayment vehicle, or health issues, or long-term care needs? Or all of the above? They might have issues just supporting themselves day-to-day, let alone helping out those within their families who might also have justified needs. In these cases, the mind might be willing but the bank account might be saying a completely different thing.
In days gone by, the options were limited; nowadays, while we might not say the options are limitless, they have certainly grown for those who own their home – with a mortgage or without – and are willing to access its equity in order to provide for both their, and their family’s needs.
The later life market is regularly cited as a key growth one for all advisers who take the time to understand and access it, and with both equity release and later life lending growing in popularity from both a customer and lender viewpoint, advisers are in the perfect position to help those near-retirees, or those in retirement, who want to tackle these issues with their home’s equity.
The point to acknowledge – particularly for those who are new to it – is that you can’t just waltz into this sector expecting to know it ‘off by heart’ with a steady stream of clients waiting for your advice. It requires specialist knowledge and understanding – and this is one of the reasons why we’re holding a series of later life events around the country in June to impart that information, and to support all advisers in this space. They are open to all advisers, not just Paradigm members, and we believe they will be valuable in order to get advice in this sector right.
Recent numbers from the Equity Release Council show the ongoing growth in lending in this space, but add in later life lending options, and you have at your fingertips a vastly-increased number of product options to solve client issues. We should acknowledge that people where possible will not stop wanting to help their family but they shouldn’t need to put up with a poor lifestyle themselves in order to do this. Solutions are available and advisers need to shout about these to get that message heard.