Home > Mortgages > Mortgage Products
PPI outlines 'greater role' for equity release
The wealth people have in their homes could play a greater role in supporting their future retirement, but not everyone has sufficient housing wealth to draw on, according to a new report by the Pensions Policy Institute.
The Institute said around 40 per cent of UK households' £6,875bn net wealth is held as housing wealth, compared with around 30 per cent held in pensions wealth.
The 85-page report, entitled Retirement Income and Assets: How Can Housing Support Retirement?, said not everyone has housing wealth and those who do, do not always view it as a way to save for retirement.
The report - commissioned by Prudential - says there are still a number of barriers to the use of housing wealth to support retirement, including homeowners' ties to their home and their area, a wish to pass on their house as a bequest, releasing equity can in some cases reduce entitlement to means-tested benefits and interest rates charged by equity release providers often appear high.
Niki Cleal, director of the PPI, said: "This research shows that if current demographic and homeownership trends continue, the number of households where the head is aged over state pension age with higher value housing wealth which could be used to release equity to support retirement - whether by downsizing or using commercial equity release products - could increase by a third, to 5.2m households by 2030."
Andrea Rozario, director general of equity release trade body Safe Home Income Plans, said it had long championed the use of housing equity to fund retirement needs.
She said: "Currently, pensioners can access £251bn worth of housing wealth and this is set to grow to £359bn by 2030, so proper consideration of this market and its potential must be a priority for all stakeholders.
"The PPI clearly sets out the barriers to growth as well as the potential solutions that use of housing equity can offer to the pensions' crisis which is - arguably - already upon us."
James Jones-Tinsley, an IFA for Leeds-based Pearson Jones, said a lot of people have their wealth locked up in their principle home and people are living longer and healthier so they need more money in retirement.
He said: "It will become inevitable a lot people who are retiring will find that their state and private pensions will not give them enough in retirement. It will be growing problem in the next 10 to 20 years.
"The bad press that pensions have had, have generally dissuaded people from saving into pensions because of the closure of final salary pensions and savers did not get the pension they expected."
