Friday Highlight  

Tapping into the £153bn later-life lending market

In April 2011 the government removed the ability for employers to insist workers retire at age 65. 

What is driving the market?

Advisers highlight interest-only mortgage redemptions as a key issue in the development of the market.

Customers are coming to the end of mortgage terms with either no repayment vehicles or one that has failed to perform. 

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Nearly six out of 10 (59 per cent) of advisers questioned for the research pinpointed the issue and more than 260,000 customers are estimated to face endowment shortfalls by the Financial Conduct Authority.

But there is a lot more to market growth than just the fallout from endowment mis-selling.

Advisers surveyed for the report stressed that later-life lending is helping people maintain their lifestyles by addressing retirement income concerns, and also coping with the fact that running out of money in retirement is entirely possible.

And right now retirement finances are under even greater pressure than ever before with the cost of living crisis having a huge impact, especially on those receiving fixed incomes. Key’s own data shows customers are using equity release plans to manage their finances with more money taken out in further advances and drawdown compared to last year. 

This is where later-life lending product innovation and evolution have helped enormously.

Advisers acknowledge that lenders have helped create the market and grow it – nearly a third (29 per cent) said the increased flexibility of equity release plans has made products more attractive, while around one in five (18 per cent) say mortgage lenders making longer terms available past traditional retirement ages is boosting the market.

Serving customers wants and needs

With the end of the default retirement age came the end of the ‘traditional’ retirement. And this has also brought about a different attitude to managing finances in later life as more and more consumers over the age of 65 navigate a more fluid path to a life after work.

In reality, many over-55s are facing retirement with concerns about their retirement income, providing ongoing care and support to elderly parents and adult children still living at home, and also with different attitudes to borrowing in retirement to previous generations.

The AKG report found just 11 per cent of over-55s felt they were well-prepared financially for retirement, with another 42 per cent saying they were financially prepared but cautious or worried.

More than one in five (22 per cent) admitted they were not financially prepared, while another 10 per cent said they were unprepared but relaxed.

Attitudes to borrowing in later life are also more relaxed than might have been the case with older generations – around 27 per cent said they would consider borrowing in later life if their retirement income was not sufficient.