Majority Of Population Unprepared To Finance Retirement

The majority of the population remain naive about how much money they will need to live on when they retire.

According to recent research, from Equity Release Supermarket, of over 4,000 people aged over 40-years-old, 80% of the respondents under the age of 60 were oblivious to how much money they would need to live on in their retirement.

The overwhelming sentiment amongst respondents overall was pessimistic, resigned to living a slightly worse existence once they stop working. Over half (51%) believed that their disposable income would drastically decrease once they enter their retirement years with a third of respondents anxious that their standard of living will deteriorate in their golden years.

In part, these feelings are exacerbated by the belief that 6% feel they may not ever be able to retire. Additionally, 12% of people over the age of 70-years-old have been unable to retire as they do not have the necessary savings or pension to finance it.

Only 29% of respondents felt that they had planned to supplement their state pension with a private pension or savings.

As people live longer, this means that those unprepared for retirement will be forced to rely on the equity in their home to supplement their retirement.

This is certainly an option that more people are utilising in the present. Quarter 1 figures from the Equity Release Council have recorded the busiest start to any year since the use of equity release was first recorded in 1991.

Between January and March 2019, 20,397 customers unlocked £936 million worth of the equity in their homes. Of these, 10,854 were new plans. The use of equity release plans is accelerating at such a pace that the uptake has trebled since 2015 when just over £300 million worth of equity was taken out using equity release plans.

Unsurprisingly, these statistics are spring-boarding off the back of 2018’s record breaking use of equity release where £3.94 billion was accessed through equity release products.

According to the English Housing Survey 2017-18, 14.8 million of the 23.2 million households are owner occupier, this has decreased from 71% in 2003. Whilst many households will be able to use this increased equity to supplement their later life, there still remains a significant amount of people that will be unable to rely on this as an option.

Dom Wilkinson, Marketing Director at Equity Release Supermarket, said:

“To live comfortably in retirement now, an individual needs to supplement a full state pension with about £12,000 per year. For a 20-year retirement, this amounts to a pension pot of £240,000. The reality is that the average pension pot is little over £30,000. Where do we think we’ll find the missing £210,000?”

David Burrowes, Chairman of the Equity Release Council, said:

“Demand for equity release is not only growing but broadening, with property wealth being used to meet a growing range of needs in later life. Today’s competitive market is helping thousands of home owners to make flexible use of their property assets to tackle a host of financial challenges, not just on their own behalf but also on behalf of family members.

“Customers now have access to hundreds of product options combining various features to suit different individual circumstances, all underpinned by product safeguards, such as the guaranteed right to remain in their homes with no risk of repossession for missing repayments.”

Although over a fifth of respondents were still dreaming of spending their retirement holidaying in exotic locations, for the vast majority, the reality seems a lot more bleak with many dependent on the equity in their homes as a means of providing any semblance of comfort in later life.

Is it concerning that so many people are reliant on equity release products to fund their retirement? 


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