In Focus: Intergenerational Wealth  

Later life lending can be part of a sustainable retirement plan 

Stuart Wilson

Stuart Wilson

The appetite for borrowing among the over-55s fell significantly in 2020, due in part to a lack of confidence as job losses, poor pension performance and concerns about the economy during the Covid-19 pandemic encouraged people to cut back.  

However, this trend now appears to be reversing as the post-Covid economy opens. Indeed, confidence is returning, with homeowners releasing nearly £2 billion in equity from their homes in the first half of 2021 alone.

More2life’s recent research predicts that all borrowing among over-55s will increase by £10bn this year to £236 billion, including secured and unsecured debt, and is set to reach £322bn by 2031.

While this is a welcome sign of returning consumer confidence, knowing how and when to borrow before managing this debt sustainably during later life will be key, particularly for those who have been hit hard by the crisis.

The simple fact is that most people do not have sufficient pension savings, assets and state support to draw on to provide them with the type of retirement they want.

This is further hampered by issues exacerbated by the pandemic whether it is poor pension performance or being forced to take early, unplanned retirement.

There are also systemic challenges with women, for example being disadvantaged by working lives which may have included career breaks due to caring responsibilities, and the gender pay gap which reinforces the gender pensions gap.

While there is no easy answer, advisers have a significant role to play in providing not only options but guidance on how people can make the most of their assets and borrowing to create a sustainable standard of living.

Naturally, needs vary widely from client to client, but the record number of equity release options available means that now is the perfect time for advisers to gauge whether a lifetime mortgage is a sustainable option for clients in need of further support in later life.

Other lending options available to older borrowers, such as retirement interest-only (RIO) mortgages and later life mortgages, are also worth exploring. 

With the borrowing appetite of the over-55s on the rise once more, advisers should use this time to see how later life lending could help to create a sustainable and comfortable retirement plan for their clients.

There is a breadth of solutions available for older borrowers, so taking a holistic view of all their assets should be front of mind for advisers, as this will be vital for determining the best route forward for individual clients. 

Stuart Wilson is corporate marketing director for more2life