Having been an equity release adviser for nearly ten years, there are two observations which stand out above all others in my mind:
- In my first years as an adviser, it was astonishing to me how little money the most elderly and potentially vulnerable section of the community managed to live on- often with incomes a low as £6,000 per annum. Even if they were homeowners, their priority was to pass their house, often the only asset, onto their children.
- A shift in the demographics such that most of the people I speak to are now younger than me- and I am only 62.
The move downwards in the age profile is perhaps not surprising given the widely publicised pressure on retirement incomes and the promotion of equity release as a routine part of retirement financial planning.
Furthermore, with more people entering retirement with mortgages, equity release is often the only secure method of repaying them. According to research carried out by equity release provider More2life, as many as 1.3 million people aged over 55 have mortgage debt and an analysis of households in England & Wales shows that 7% of over 65s still have mortgages.
The baby boomer generation is proving far more ready than their parents to consider equity release in order to make sure that retirement does not imply a reduction in their standard of living. It would seem that they are more likely to take the view that the children should be able to look after themselves financially.
However equity release is also increasingly being used as a method of providing financial support to younger family members, for example to assist with getting grandchildren onto the housing ladder or with university costs.
A report recently written by Oxford Economics includes an estimate that equity release schemes could lift a million pensioners out of poverty between now and 2040 – provided those in retirement have the confidence to make use of them.
With 60% of pensioners owning their own home, lifetime mortgages and home reversion plans can provide the means for supplementing pension incomes and reducing poverty in retirement.