Chris Prior is Business Development Manager at Bridgewater Equity Release
The age at which we retire may have once felt like an immovable target that we gradually worked towards throughout our working lives, but it seems to have become a shifting goal that is just as likely now to disappear over the horizon at the point where we think it is coming into sight.
The state pension age is expected to increase to 67 in the next decade or so and factoring in the predicted ages beyond that, someone currently aged between 25 and 29 won’t be able to collect their pension until they are 73 years old.
The number of people working beyond the official retirement age has almost doubled to 1.4 million in the past 20 years according to the Office for National Statistics (ONS), showing that even when older people make the hallowed age, they are still not in a financial position to down tools completely.
The report from the ONS also reveals that 39% of older workers are male and 61% are female which is a huge gulf.
While two thirds of older men are in so-called ‘higher-skilled’ positions such as directors or CEOs, the same percentage of female workers over the state pension age are in jobs classed as lower skilled including cleaners and retail assistants.
As well as possible inadequate pension provision in the past, the report suggests that men may continue working for the challenge and status while women continue to work out of financial necessity.
Another interesting fact to emerge from the research is quite how much changing demographics could affect the UK’s GDP levels in the future.
With the proportion of people aged over 65 expected to be 28% by 2035, this effectively shrinks the workforce and means that unless more people around and beyond retirement age continue to work, then the GDP would be 6% lower.
Pension problems and an ageing population are not just a concern for the individual therefore, but a conundrum for the Government and country as a whole.
How this collection of problems is solved is a poser that successive Governments have failed to address, but one potential solution has been staring them in the face for the past couple of decades and that is equity release.
Older homeowners may feel compelled to work long into their twilight years without realising the untapped potential that is underneath their feet.
Some people may think the only way property can subsidise their pension is if they have been canny enough to become a buy-to-let landlord, but by releasing some of the equity that has built up in their property over the years, older homeowners can pay for a range of necessities from medical and care needs through to bills and other outgoings.
There can sometimes be a fear or lack of understanding that leads those that could potentially benefit from equity release to wrongly think they could be plunged into negative equity or forced out of their homes against their will, but they are protected by a code of conduct established by Safe Home Income Plans that the Equity Release Council will continue to purvey.
There may be those who wish to work in their later years due to job satisfaction or the social benefits that employment brings, but others can rightly feel they have earned their retirement and are entitled to a slower pace of life.
Having worked for the best part of 50 years and made mortgage repayments for the vast majority of that period, it seems only right that older homeowners should be able to reap the benefit of that diligence by accessing some of the capital they have accrued throughout their lives.
It may not be the answer for everyone’s circumstances, but equity release is certainly an option worth considering.