Chris Prior is Manager of Sales and Distribution at Bridgewater Equity Release
The best-laid plans of mice and men often go awry. So reads a line from an old poem by Robert Burns, but the astute observation could equally apply to all those individuals who had their dreams dashed by the global financial crisis. In addition to the thousands who lost their jobs and the numerous companies that went to the wall, who knows how many mooted projects failed to even get off the ground as the recession took hold? Similarly, while there may be accessible figures on the number of unemployed or evidence of the rising cost of living, it isn’t quite as easy to put your finger on how many people have raided their savings to meet everyday expenses or siphoned funds earmarked for more exciting projects for more mundane reasons.
Some recent research conducted by Age UK hints at the extent of this reappraisal of priorities among the older generation and how even the most careful of planners are finding themselves with tough decisions to make as they approach retirement. According to the study of individuals aged over 60, nearly three-quarters have made exciting plans for their twilight years including exotic holidays, home refurbishments and exploring new hobbies, but almost a third think these ambitions will be scuppered due to uncertainties and negativity around their financial situation.
Considering that even those who made the necessary preparations to maximise their income in retirement are finding it tough, the situation for those who have buried their head in the sand doesn’t even bear thinking about. It also highlights the importance of planning ahead even for those who are nowhere near retirement. If older generations are unable to realise their retirement dreams when backed by pensions that dwarf those on offer today, then it shows how much prior thought has to go into preparing for when your salaried days are over.
One way that older homeowners can bridge the gap between their income and completing their individual bucket lists is by unlocking the potential value of their homes and releasing some of the equity contained therein. The Age UK study highlights the usefulness of equity release in such situations and home reversion plans and lifetime mortgages can be just as adept at supplementing day-to-day affordability as they can at providing for later-life luxuries.
In the past few years we have witnessed a shift in the reasons for releasing towards more practical usage such as debt management, but there is nothing to stop individuals utilising the plans for whatever they want. Some optimistic pundits are predicting that the worst of the current double-dip recession is behind us and that 2013 could mark the year that things really start to turn the corner, so it will be interesting to note if the reasons for releasing equity start trending back towards more exciting projects. One thing is for certain is that no matter what the motivation for accessing equity, with pensions dwindling, older homeowners will have to at least consider equity release.