It is often presented that baby boomers are the most financially secure generation, enjoying generous pensions and living mortgage free. However, the image of retirees enjoying the good life is inaccurate for many.
Research has found that by late August, average annual spending for pensioners has exceeded their yearly State Pension income with still another four months left of the year. This difference between the cost of living and the pension they receive from the state is the cause of money worries for many in later life. The assumption that most people in later life own their homes outright is also incorrect for many, as a reported 26% of over 55s with a mortgage believe that they will be still paying off their mortgage after age 65 and the number of over-50s renting is also on the rise. These statistics highlight the benefit of additional income sources beside the State Pension.
As pensions are no longer sufficient to cover living costs for many, equity release is shifting into part of the mainstream suite of later life retirement products, and growth in the sector is continuing steadily with the Equity Release Council’s Autumn Market Report showing a 6% year-on-year increase in the total number of equity release customers served across the first half of 2019. Care is a major area of financial concern for those in later life, with almost 40% of baby boomers approaching retirement saying that they’re concerned that care costs in the future will hold them back from spending more in retirement. Customers’ changing mind-sets in favour of equity release is shown by the fact that almost a quarter of those pre-retirement would prefer funds to be unlocked from their property to pay for care costs in later life, instead of using their pensions
Later life financial concerns are reflected in the financial planning support sought from advisers. Retirement planning is the largest single driver of revenue growth for financial advisers and this provides opportunities for equity release to fit into a holistic range of financial planning products. However, many advisers are still wary about advising on equity release, with 70% of those surveyed by LV reporting that they feel uncomfortable or unable to discuss equity release with their clients. Equity release advisers recognise that the potential vulnerability of clients in later life is an important issue and believe there is a need for greater support and education to help advisers recognise and deal appropriately with vulnerable clients. As over 50s are in particular need of later life financial advice and as interest in equity release continues to rise, the imminent retirement of 15,000 advisers is particularly concerning.
Money worries are increasingly affecting those in later life, in part due to pension provisions no longer offering sufficient retirement income for many and the high cost of long term care costs. In this context, adviser education will be become increasingly important in order to offer customers the best support and options for them.