Equity Release in the Spotlight to Plug Gap in Retirement Savings

The Equity Release Council (ERC) met with MPs and peers on 5 November to examine the current attitudes of older people towards saving for retirement. 

Recent research conducted by the ERC earlier in the year revealed that nearly two-thirds of adults in the UK were unaware, unwilling or unable to address the financial challenges facing them in retirement. These findings are of particular relevance in light of recent concerns regarding our ageing population, the continued rising cost of living and the increasing number of people finding themselves approaching retirement with insufficient savings.

The meeting focused on the different attitudes that those approaching retirement can take and the various options for later life funding that are currently available.

Although home ownership has been in decline since its peak in 2003, more than half the population still own their own homes. This asset cannot therefore be ignored when preparing financial plans. In certain circumstances releasing equity from the main residence may be appropriate. The Equity Release Council figures show that 14,000 over-55’s have used equity release so far in 2013; the average amount of equity released being £57,107.

Equity Release is not only the reserve of those in financial straits. Grandparents are unlocking equity from their homes to assist children and grandchildren with home purchases. Others are using home equity to fund care at home, thereby avoiding the need to sell and move into residential care. Further aspirational needs such us upsizing in retirement and travel is also being funded through equity release, although apirational spending tends to be controversial and at the margins of good advice.

Nigel Waterson, Chairman of the Equity Release Council, said:“With budgets already under considerable pressure, it is understandable that many are choosing to push retirement planning further down their to-do-list in favour of more pressing matters… Retirement planning can be a daunting topic, but the best way to find your way through the maze of options that are available is to seek professional advice from an independent adviser. Accessing housing wealth can often be a logical option for those who find themselves reaching retirement asset rich but cash poor, and thanks to the recent house prices increases this potential pool of wealth is swelling.  Equity release can allow you to release money from the value of your home without the stress of having to move, and you can even set aside a portion of your estate in case you want to leave this as an inheritance for your children.”

The Equity Release Council and the wider industry have continued to put measures in place to safeguard consumers. As Chartered Financial Planners and with our membership of the Society of Later Life Advisers (SOLLA) we explore all suitable options with clients before recommending any particular course of action. Our view is that whilst Equity Release is not appropriate for all clients, where downsizing and other options have been considered and dismissed, it can offer a valuable solution.

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