Equity release: Getting ahead of the pack
Equity release, while not for everyone, can give a significant edge as a qualification to an adviser.
The simple fact is that the UK population is gradually getting older. By 2017, we expect to see over 660,000 people reach the age of 65 and – depending on their health and finances - retire. This is only going to increase and by 2056 – more than 800,000 consumers who are currently aged 18 to 24 will be staring retirement in the face if they are able or choose to stop work at age 65.
What does this mean for the economy, the taxpayer and – crucially – the intermediary community? Well, longevity – while obviously a boom for the individual – is a bit of a headache for the government as it is required to support “economically-inactive” people for longer. This places a burden on the taxpayer who – incidentally – is also getting older and ultimately, if nothing is done, will create a fatal imbalance between the number of workers and the number of pensioners.
How to tackle the pensions gap is one that has been pondered extensively. It is time to get more creative than simply suggesting that people save more
This issue has been recognised by the government and we have seen a variety of different steps taken – such as the end to the default retirement age - which will help to alleviate this growing issue. However, the basic fact is – and you may have heard this before – people are not saving enough for retirement and in the current economic climate, for some this is simply not an option.
Indeed, many of those still of working age – possibly with families to support – are struggling with rising cost of living, amid a backdrop of economic turmoil. Setting aside even a small amount each month might make a big difference in a family’s budget, and therefore it is easier to prioritise their immediate needs and postpone planning for a future expense.
As a result pensioners are reaching retirement and finding that there is a significant gap in the amount they have saved and the amount they will need. In fact, for some there is a vast gaping chasm. How to tackle this issue is one that the financial services industry and government have pondered extensively and I would suggest that it is time to get more creative with the answers rather than simply suggest that people save more.
If this message is taken on board – and looking at recent product innovation and legislation – it seems that I am not alone in suggesting this approach; there is a big opportunity for the financial advice sector to step forward and help to provide solutions.
However, unfortunately, this will not necessarily prove to be an automatic or easy opportunity – especially as the advice sector in the UK is undergoing some pretty fundamental changes of its own. The retail distribution review is one of the biggest challenges on the horizon and already, we have got the more gloomy end of the market suggesting vast defections out of the industry as advisers acclimatise to charging customers fees for advice.