Using equity release in retirement planning has become “more nuanced” since pension freedoms, the head of marketing for Retirement Advantage has claimed.
Alice Watson cited two recent reports, which seemingly presented contradictory claims over what people intended to do with their home when it came to retirement planning.
At the end of July, Aviva’s Real Retirement Report suggested almost half (46 per cent) of over 45s polled by the provider saw property as “a key part of retirement incoming planning”.
However, within a week, a survey from Aegon UK claimed 74 per cent of homeowners “do not want to use their property as a means of funding their retirement”.
Since the introduction of pension freedoms in April 2015, we’ve seen retirees taking a holistic approach to retirement income Alice WatsonMs Watson said the confusion is best explained by misguided presuppositions among the researchers responsible.
“The two surveys seem to imply 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.”
She said the reality was far more nuanced.
“Since the introduction of pension freedoms in April 2015, we’ve seen retirees taking a holistic approach to retirement income. Releasing equity from their properties yes, but coupling that with annuities as well as investments that provide a more flexible income”, explained Ms Watson.
She highlighted research in July this year from The Pensions Advisory Service, which revealed the average pension pot size among those from whom they receive enquiries is approximately £45,000.
This compares with the average UK house price, which 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”, she said, adding: “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.”
Dean Mirfin, technical director at Key Retirement, agreed that many firms specialise. “For example, some advisers may not work with older clients, and where this is the case we are seeing them establish referral arrangements for certain types of business; including equity release.”
Mr Mirfin said there are now more than 65 equity release plans available, making research “ever-complicated”.
He added there is no real answer to how any adviser transacting little volume of any type of product should want to, or be considered to, have sufficient levels of knowledge and competence to do so.
“The way to include equity release in advisers’ toolkits will remain to have a good referral partner to work alongside.”
