A recent poll conducted by the Equity Release Solicitors
Alliance (ERSA) has found nearly three quarters of the adult
population are drifting towards retirement without adequate
funding, despite being aware their monthly pension contributions
Market data reveals that, at current rates, a lump sum of around
£200,000 is required to generate theUKaverage net annual retirement
income of £16,332. Annuity rates have been coming down in recent
years and so the total lump sum required has had to increase to
provide the same level of income.
Based on their understanding of this, the ERSA poll found less
than 15% of respondents believe their current monthly private
pension savings will be enough to allow them to live comfortably in
retirement. Meanwhile an overwhelming 73.3% of those polled do not
feel they save enough towards their pension each month, with just
over 13% expecting to rely on a state pension (which would
currently provide a single person with just over £100 a week - or
less than £6,000 a year).
The ERSA survey found mindsets are changing towards alternative
means of paying for retirement. 54% of 16-24 year olds are now
considering equity release as means of releasing funds. Younger
generations have lost confidence in their ability to save enough to
live comfortably in retirement, and as such are more receptive to
other options such as equity release to cover the shortfall.
Saving up a lump sum of £200,000 can be daunting; however
current data indicates the typical value of the over-55's home
exceeds the amount at £236,474*. While how much people decide to
release is based on their individual needs and also their age it
demonstrates that people are sitting on a potentially valuable
source of equity which they can access - while remaining in their
own home - if they need to supplement their finances.
ERSA believes educating consumers about retirement planning is
crucial. Equity Release solicitors have a vital role to play here
as the more informed people are, the more likely they are to make a
decision which they feel comfortable with.
With the average value of the over-55's home £36,474 greater
than the £200,000 lump sum needed, equity release schemes offer a
viable solution to plug the gap between pension pots and living
costs. For the 73.3% who do not believe they save enough towards
their pension each month, equity release may prove essential.
The recent revival of government backing of the Dilnot report,
promising to cap care fees at £35,000, will provide much needed
financial backing for those requiring elderly care. Yet a
substantial sum will still need to be self-funded, and many other
costs of elderly life remain unaided. Advisers and specialist
equity release solicitors will need to continue to play a central
role in financial planning for retirees, and work to improve the
public understanding of equity release.
*Statistics from the Aviva Real Retirement Report Summer - July