In previous a blog article we explored why there is no one-size-fits-all equity release product, and it is becoming increasingly clear that as the UK population continues to live for longer, consumers will need a mixture of different retirement solutions personalised to their specific circumstances.
There is data suggesting that for some consumers, traditional retirement income sources including pensions are not sufficient to provide the income that many customers would desire in later life. The current average income of today’s single retirees is £17,212, yet average older homeowners anticipate they will need an annual income of £35,196, over double the real average income, to cover their individual needs. But not everyone is able to increase their projected retirement income by raising their pension contributions, with many over-55 homeowners telling researchers that they cannot afford to do so because of factors including rising living costs (30%), mortgage repayments (24%), needing to support financial dependents (22%) and low earnings (24%).
An additional financial pressure for over-55s is the high cost of long term care, which comes out at around £30,000 a year for a care home place and is even higher if nursing care is required. Care is something that many will need at some point during later life, but their pension savings may not provide enough funds to pay to cover these costs. With their home the largest financial asset for many people after their pensions, it is likely that equity release will be one of the ways that customers will increasingly choose to fund care for themselves or their loved ones.
With many older homeowners finding themselves in the position of needing additional income sources to top up the funds they receive from pensions or employment, it is unsurprising that UK Finance has reported a 6% year-on-year increase in the number of older customers accessing funds from the value of their homes from 2018 to 2019, either through re-mortgaging or equity release. The average equity release customer unlocks around 30% of their home’s value, which based on current house prices suggests that the average homeowner in England and Wales would be able to access around £88,290 from their property, according to the Equity Release Council. This represents a sizeable cash injection, equivalent to over ten years’ of state pension payments, and one that increasing numbers of consumers will potentially choose to access to allow them to enjoy their retirement in a way which suits them.
With the retirement landscape changing, as well as care and living costs rising for many, customers can use equity release in combination with multiple different retirement solutions to enable them to enjoy the security and standard of living that we all deserve.