BSA 2015: Age UK urges caution on ER

Nia Williams

May 20, 2015

Age UK offers its own equity release products in the form of lifetime mortgages and home reversion plans, but Steele didn’t consider housing wealth to be the first port of call for retirees looking to boost their income.

He said: “We take a cautious approach towards it and the obvious problem with equity release is if people dive into their equity too early into their retirement.

“The answer is to have some sort of path where people may start off with a repayment mortgage, they might move to interest only. Maybe then you dip into your equity to deal with a life crisis or care situation.

“I say be cautious in terms of using it early in retirement but it’s there as part of a package of responses.”

Age UK is not in favour of age caps when lending into retirement, Steele added, because older people differ considerably in how risky they are as borrowers. Indeed, he expected the UK to change its attitude towards older borrowers going forward.

He warned that pension freedom could result in overspending. He added: “it’s not hard to imagine people running through their money too fast.

“While people are not going to blow their pensions on Lamborghinis there is a distinct tendency to want to take money out to fund living expenses.”

Managing money in retirement will become an increasingly key issue once the less wealthy generation X, born between the 1960s and 1980s, are retiring. Steele said: “We’re in the trajectory where people retiring will be on lower incomes than their parents, so it’s going to be quite a challenging period waiting three or four decades for defined pensions to mature.

“Let’s face it. We’re heading for a dip in retirement income because of the abolition of defined benefit pensions in the private sector.”

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