Published today, the new report ‘Housing and Finance in Later Life' reveals that while a quarter of those surveyed have used equity release to make early bequests and large one-off purchases, the remaining three-quarters have used it as a way of boosting capital either to increase financial security and enable a more comfortable retirement or as a last resort to relieve financial difficulty or debt.
The charity is warning that although more than two-thirds of over-65s are homeowners without a mortgage,2 many are living on low to modest incomes and struggling to maintain their homes. One in seven (14%) of those surveyed were in receipt of Pension Credit, and some of the respondents felt there was no option but to use equity release to pay for housing repairs in order to continue living in their homes - a key concern for many older people.
Almost two-thirds did not want to move away from family, friends and local amenities, just over half did not want the upheaval of moving house, and over a quarter said that it would have been too expensive to move house.
In these times of austerity, the charity is concerned that many older people are finding it increasingly difficult, earlier on in retirement, to maintain a decent standard of living using their pension alone. The recession has further exacerbated this problem with many older people seeing their living costs rise as their savings income falls.
The report argues that this could explain why equity release customers are getting younger,3 with the average age of purchasers falling from 74 to 72. In fact, previous research for the charity found that around 25% of people are approaching state pension age with outstanding credit commitments.4
Michelle Mitchell, Age UK's Charity Director, said:
"The ageing of our society is a triumph of modern life yet brings with it some real challenges. Equity release is clearly a useful tool to ease financial pressures in later life but anyone considering it as an option should first seek good quality information and advice."
Louise Overton, report author, University of Birmingham, said:
"The research shows that people take out equity release for a variety of reasons with increasing numbers using it to clear problem debt. But it does not play much of a role in lifting pensioners out of poverty. This suggests a need for more consideration of how those with very low incomes and limited housing assets might benefit from equity release should they wish to use it."
Despite just less than half of those surveyed reporting that they were "very satisfied" with the value for money offered by their equity release plan, there was some good news for the industry with high levels of satisfaction reported in relation to the plan being right for their needs (75%), information and advice (79%) and safety and security (66%).
Laurie Edmans, Chairman of SHIP, said:
"Age UK is a hugely respected voice on issues affecting the over 55s and we are delighted that they have chosen to review the equity release market in more detail. The feedback within the report shows that there is a high level of satisfaction amongst equity release customers - a ringing endorsement of an often maligned industry.
"Indeed, with 97% of respondents saying they felt satisfied that the plan they took out was the right one for their needs, this study goes a long way towards dispelling some of the myths about equity release. In addition to worries about ‘buyers regret', concerns about the safety of these products are often highlighted by critics.
"SHIP has campaigned long and hard over the years to introduce and support a raft of safe-guards aimed at dealing with past problems. The no-negative equity guarantee and introduction of specialist equity release qualifications are but two of the steps that the industry has taken to ensure that customers are able to access the equity in their homes with confidence.
"When this new report is considered alongside evidence from the Pensions Policy Institute and the SHIP discussion paper, the case for equity release to be seen as a standard part of retirement planning is serious and close to becoming irrefutable."
