ERSA poll reveals nearly 3 in 4 will retire without an adequate income

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 are insubstantial.

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 2012. 

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