UK equity release firm, Key Retirement, are stating that lenders must become less strict towards older borrowers. This comes response to a recent study the firm commissioned, where many consumers believe they will still have outstanding debt when they retire.
Why are UK residents struggling with finances later in life, and what should wills and probate professionals be advising clients to help avoid this?
Conducted by Research Plus, an online survey was completed by over 3,000 working adults who currently live within the UK. It revealed that one in five claim they will still have outstanding repayments once they are able to leave work.
Key Retirement say there are many factors that may have contributed to the increase in money issues later in life. Higher house prices, low wage growth and the demise of final salary pensions means that retirees no longer have the security they once had when they leave work. But who is to blame for these shortfalls: the consumers themselves, or the professionals?
This research suggests that financial planning within wills and probate is more essential than ever. Lenders do have an obligation following the Mortgage Market Review (MMR) to ensure consumers are able to afford loans, but they must also ensure a fair system for all. However to aid future generations, will writers should be providing thorough analysis of a testator’s current financials, as well as possible future circumstances. If this isn’t carried out, not only could the consumer face issues when they retire, once they’re gone, the cycle will continue with debts being passed on to their family members.
The study also showed that more than half of over 45s currently have remaining debts outstanding, which includes their mortgage and various other financial commitments. This figure varied on a regional basis, with East Anglia having one of the highest levels of debt at 58% and London having the lowest figure in the UK at 45%.
Dean Mirfin, Director at Key Retirement, commented that pensions have changed dramatically over the years. He says consumers previously could retire comfortably with some debt still to pay, as final salary pensions could support them. Unfortunately, according to Mirfin, this is increasingly no longer the case.
Further research from Age UK uncovered that a vast number of older people struggle to pay debts. Key factors they found include low returns from savings investments, declining annuity rates and surging living expenses.
Wills and probate professionals must stand up to support their clients, at the earliest opportunity, long before retirement age is looming. For some it may be too late to action appropriate steps to improve financial circumstances, but more clearly needs to be done to save future generations from similar fate.
