Chris Prior is Business Development Manager at Bridgewater Equity Release
For some people retirement is something to look forward to far in advance and with this sense of anticipation comes meticulous planning covering everything from income and pension provision to once-in-a-lifetime trips and activities to tick off one’s personal ‘bucket list’.
However for others ceasing employment is an admission of old age and an eventuality that is only to be thought about when it arrives. To this end, many individuals fail to make adequate plans for their retirement or don’t quite appreciate quite how much money they need to put aside for their twilight years.
New research released recently by the Equity Release Solicitors’ Alliance (ERSA) has highlighted the gulf between how much people think they need to see them through retirement and what they have actually been saving. It has also uncovered some eye-opening differences between how different demographics perceive equity release and the impact that savings shortfalls are likely to have on people accessing the capital they have established in their properties.
With the average lump sum required to generate the UK average net annual retirement income currently standing at £200,000, just one in four respondents to the survey thought they were capable of stashing this amount away before their retirement. More worryingly still is the statistic that 46% of people are currently saving nothing at all and 32% are saving less than £250 a month.
When confronted with the financial reality of what is required to fund the average retirement the percentage of people considering equity release doubled. To start with 16% of those surveyed by ERSA admitted they were likely to release equity from their homes but when presented with the above figures this soared to 34%.
This is undoubtedly encouraging news for all equity release stakeholders, but other findings from the survey show that those at or close to retirement are still the most uninitiated when it comes to the potential benefits of lifetime mortgages and home reversions.
Just 14% of over-65s and 19% of those aged between 55 and 64 are currently considering equity release, as opposed to a healthy 54% of individuals aged between 16 and 24. It is heartening that younger generations are receptive to using equity release in the future but as an industry we can’t afford to wait 40 years for such people to reach retirement age and we need to increase the percentage of those already at a suitable age considering equity release.
It is never too late to improve peoples’ financial literacy and awareness of different products and services, and the ERSA survey is the latest in a long line of surveys that suggest attitudes towards equity release continue to improve.
But this doesn’t mean that we can afford to rest on our laurels as a sector and rely on things improving in the future. Indeed, it should be an industry-wide objective to attempt to assist those older homeowners currently in financial predicaments as a result of savings shortfalls, inadequate pension planning, increasing costs of living and the variety of other pressures that are affecting everyday affordability.
We constantly hear about the possibility of financial education being introduced into the curriculum and how individuals in their teens and twenties are savvier than previous generations due to the way they embrace technology and information sources but as a nation we really need to prioritise the level of advice and support that is received by those who need it most urgently.