Two-thirds of over-65s feel proposed flat rate pension is inadequate

  • Just 26% of all UK adults feel they could live comfortably on the proposed flat rate state pension

New research from the Equity Release Solicitors Alliance (ERSA) has found almost two-thirds (63%) of homeowners aged 66+ wouldn't be able to live comfortably on the proposed flat rate state pension, even if they had no mortgage or rent to pay.

Just one in four of all UK adults feel they could live comfortably on the proposed new flat rate pension of £7,280 per year (£560 per month). However, the number of people who consider the proposed amount will not be enough to live on increases markedly with age as 38% of 18-29 year olds do not feel they could live comfortably on this amount in retirement compared to 63% of those aged 66+, perhaps reflecting the reality faced by the older age groups.

Claire Barker, ERSAClaire Barker, Chairman of ERSA said,

"The Government is seeking to encourage greater individual responsibility in retirement planning.  As such people will need to carefully assess how they will provide themselves with an income to supplement the proposed new flat rate pension.

"People in retirement face different demands on their income. They are more exposed to specific price rises - such as fuel price hikes - and unfortunately as they get older they may face substantial costs arising from long term care while living on a relatively fixed income. For many people in retirement their home will remain their largest asset and therefore - with the average house price in the UK standing at £161,823 in May* - in some cases it will make sense that people look to equity release to provide monies to help pay for the costs associated with retirement.

ERSA's quarterly tracking survey found there has been an upsurge in the number of people who now hold a positive view  of equity release compared to two years ago, and 19% of people said they are now definitely considering using or will use equity release to provide funds for retirement costs (up 1% on the previous survey in March 2011).

The survey found that a Government stamp of approval would have a significant impact on the equity release market, with 32% saying this would make a positive difference to their likelihood of taking out an equity release product in the future.

Claire Barker added,

"This Government has been very focused on retirement funding issues and as such equity release is being increasingly talked about at the highest levels. People are being pushed to examine how they will finance their retirement and for many people equity release will be a suitable option. It is vital that people understand the importance of taking professional financial advice to create the most suitable plans for their retirement, and just as importantly is the role of solicitors who can make sure people understand the legal obligations attaching to them."

- Ends -


Editors notes:Independent online survey undertaken by Wriglesworth Research in June 2011 among 1,105 UK nationally representative consumers aged 18-84, 59% of which were homeowners.

* According to the latest Land Registry figures

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