Majority of homeowners, 63 per cent to be precise, aged 65 years and above are worried that they will not be able to lead a comfortable retirement life as the government’s proposed flat rate pension will be inadequate, even if they had no rent or mortgage to pay, found a survey by Equity Release Solicitors’ Alliance (ERSA).
Only one in four adults in the UK said they will be able to live comfortably on the proposed single-tier state pension of £7,280 a year, while many will depend of equity release, said ERSA chairman Claire Barker.
“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,” said Ms Barker.
“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,” she added.
“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 money to help pay for the costs associated with retirement,” she said.
Compared to two years ago, more people hold a positive view on equity release, ERSA’s quarterly tacking survey found. 19 percent of the respondents said they are definitely considering or have decided to use equity release, which is a 1 percent gain over the last quarter.
“Equity release will play a vital role in retirement planning. It is not just a lack of income that will drive this need but an inability to provide support as family groups are often spread around the country, which means that any help needed by later-life clients may need to be paid for,” said Lorreine Kennedy, IFA at CareMatters.
“We would always consider other options first, such as downsizing to a smaller property. But for many, downsizing is not something they are prepared to do. While it is not for everyone, if appropriate advice is sought and the whole family is involved, then equity release can provide much-needed income or capital,” she added.