"With the average income for 55+ household standing at just over £15,000, and that same average household spending £23,000 every year, there is an obvious problem."
However, more so than ever, the importance of belt-tightening in retirement is growing.
The current retirement age will soon be a thing of the past, and today’s younger generation will more than likely be working well into their seventies. Planning ahead for retirement will be an incredibly serious consideration for the young. Plus, I imagine it will be one that the Government and the individuals themselves will not tackle head on until it’s too late.
That has been the unfortunate reality that has struck, and will continue to strike, the current cohort of British retirees – they have simply miscalculated how much they will need to have saved for a retirement that will last far longer than their parents and grandparents.
What’s more, compounding this miscalculation is the fact that even those who are retired are still spending way too much to make their post-work savings last. According to research from one of the newest members to the equity release family, the aptly named OneFamily, the average retiree is spending £8,000 more than they planned every single year. With the average income for 55+ household standing at just over £15,000, and that same average household spending £23,000 every year, there is an obvious problem.
OneFamily’s research also shows that this figure is expected to rise even further. So, with millions of people currently in retirement, and the average retiree overspending by over 50% of their total income, retirees face a decision: tighten the belt and live out retirement frugally, or seek finance from another source.
Belt-tightening may be a bitter pill to swallow for many, I’m sure. For many retirees who feel they have worked long and hard throughout their lives, but have perhaps not saved enough for the retirement they feel they deserve, this pill will be rejected. So they need a plan B.
For homeowners in this situation, the use of housing wealth, namely through products in the equity release stable, is increasingly becoming a way they can have the retirement they envisaged.
The beauty of equity release is that there are no immediate payments, the benefits of which is something that the mainstream media, the Government and we as an industry are still failing to get across clearly to our customers. For those retirees who have amassed great amounts of housing wealth over the years (and that’s pretty much anyone who has lived in the same house for at least 15 – 20 years!), the allure of a product that can deliver them tens of thousands of pounds in tax-free cash (the average release is just over £75,000) while also never demanding any monthly payments, is often the perfect fit for their lifestyle.
Yes, inheritance will be eroded and the impact of compound interest must be fully understood by the customer and naturally the product chosen must fit their individual needs along with all options taken into consideration but this does not mean equity release is a dirty word and for an increasing number of people it’s a very real solution.
Of course, equity release is not just a tool to fund worldwide cruises or extravagant living, in fact it can be a real safety net for those who find themselves in deep financial difficulty; it can help retirees assist their kids and grandkids onto the housing ladder; it can be used as a way to release cash to start a business; it can be used to help retirees pay off mortgages they may be struggling with and myriad other possibilities.
Versatility is perhaps equity release’s best attribute, and for those who wish to release their equity via a lifetime mortgage to fund a retirement of enjoyment, the increasing number of products available will help them to do so with the added benefits of numerous safeguards.
