Just 1 in 4 expect to save enough for current average retirement income

The general public is burying its head in the sand over how much they need to save to fund themselves in retirement, but is becoming increasingly receptive to the idea of equity release, according to the Equity Release Solicitors' Alliance (ERSA).

New research from ERSA* found people are still not saving enough for their retirement and don't understand how much money they need to put aside. At current rates, people need a lump sum of around £200,000 to generate the UK average net annual retirement income of £16,332** (or a net monthly income of £1,361). But just one in four respondents think they will be able to save this amount before they retire, and ERSA found 46% of people are currently saving nothing at all and 32% are saving less than £250 a month.

While 16% of people said they would definitely use equity release or are quite likely to, when presented with the above figures 34% of people said they are now more likely to consider an equity release scheme or are definitely intending to use one.

Highlighting the benefits of equity release

Claire Barker, Chairman of ERSA, said: "The findings demonstrate there is a huge lack of awareness over how large a lump sum is needed to fund a retirement income. This is causing people to drift into retirement without adequate funding. While more work still needs to be done to educate consumers about retirement planning, the good news is that the more informed people are, the more likely they are to consider using the equity built up in their home to fund their retirement.

"With three quarters of people not sure they will be able to save enough to live comfortably in retirement, they will need careful independent financial advice as to their options."

Changing mindsets

A willingness to consider an equity release mortgage is highest among younger age groups (54% of 16-24s and 39% of 25-34s). However, despite being close to retirement 44% of 55-64 year olds are currently not saving anything each month (see table below).

Breakdown of attitudes towards retirement finances and equity release by age group

Age

16-24

25-34

35-44

45-54

55-64

65+

Think they will save enough

24%

19%

20%

27%

30%

38%

Considering equity release

54%

39%

39%

27%

19%

14%

Currently saving nothing

63.9%

47.2%

42.9%

38.6%

44.3%

54.2%

There are also key differences between how men and women feel about equity release. While men and women are similar in terms of how likely they are to use an equity release plan, women are more likely than men to be undecided (40% vs 32%), which is possibly because they have lower financial expectations in retirement (24% of men say they would need more than £2,000 a month compared to 21% of women).

Claire Barker said: "There is a clear benefit to engaging with retirement planning sooner rather than later, but attitudes towards equity release are increasingly positive.

"The younger generations are less confident they will be able to save enough to live comfortably in retirement and are more receptive to equity release, but the numbers of people approaching retirement with inadequate savings is still worryingly high."

In The News

25th July 2012: Equity Release Council figures show total advances of £224....

Read More

Surveys & Polls

If you need extra income in retirement what would you be more inclined to do?

Read More

Blog

Equity release is becoming an increasingly popular part of financial settl...

Read More