OpinionAug 15 2016

Popularity of equity release will continue

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Popularity of equity release will continue
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Towards the end of July, research was published suggesting almost half (46 per cent) of over 45s see property as “a key part of retirement incoming planning”.

Less than a week later, a new survey surfaced claiming that 74 per cent of homeowners “don’t want to use their property as a means of funding their retirement”.

So how do we unravel these seemingly contradictory claims? The confusion is perhaps best explained by misguided presuppositions among the researchers responsible.

The two surveys seem to imply that people approaching retirement fall into two distinct camps: those planning to use their property lock, stock and barrel for retirement income purposes; and those who plan to leave their housing equity untouched.

The reality, of course, is far more nuanced. Since the introduction of pension freedoms in April 2015, we’ve seen retirees taking a holistic approach to retirement income.

It makes sense that property is used in retirement to supplement income from cash savings

Releasing equity from their properties yes, but coupling that with annuities as well as investments that provide a more flexible income.

Earlier this year, The Pensions Advisory Service revealed that the average pension pot size among those they receive enquiries from is around £45,000, while the average UK house price hit £215,000 in the second quarter, rising to £450,000 in London.

So it makes sense that property is used in retirement to supplement income from cash savings.

That doesn’t mean the placing of all eggs in one property-shaped basket, but rather using property equity as a key piece in a larger retirement income jigsaw.

The majority of UK retirees are asset-rich, cash-poor. As such, equity release is a sensible option for those who want to make the most of their properties in retirement.

We also know the motivations for using equity release are changing all the time. We’ve seen substantial increases in the proportions citing home improvements, holidays, gifting to family members, purchasing cars and helping first time buyers as reasons for doing so.

For these reasons, I believe equity release will no doubt continue its rise in popularity as it cements itself in the retirement finance mainstream.

Alice Watson is head of marketing at Retirement Advantage Equity Release