Retirement aspirations and financial planning drives almost half of equity release customer choices, according to new research from Standard Life Home Finance.
Its ‘Lightbulb Moment’ research considered views from 418 people who had taken out equity release and 94 who had declined to proceed after enquiring about the products.
32% of those who took out equity release said they did so because they realised they wanted more from life as they got older and needed additional money to do this, while 11% said their family and friends needed their support. Others were more focused on financial planning, with 17% saying that they had always known that their pensions and savings were not enough, while a further 11% revealed that they considered their options as they realised their finances would not provide them with the standard of living they wanted.
Just 8% said their choices were driven by a life event which derailed their retirement plans – such as divorce, redundancy, or illness. Interestingly, 17% who did not take out equity release said their need for additional money was driven by a life event. This cohort was also more likely to say they had always known their pension and savings were not enough (+3% to 20%) and be keen to support their family and friends (+4% 15%).
| When did you first realise that you needed additional money to meet your needs | Took out equity release | Didn’t take out equity release |
| I wanted more from life as I got older and needed additional money to do this | 32% | 17% |
| I had always known this as my pensions and savings are not enough | 17% | 20% |
| Having spoken to family and friends, they needed my support | 11% | 15% |
| As I approached retirement, I took a look at my finances and did not have enough to enjoy the standard of living I wanted | 11% | 11% |
| A life event such as a divorce/redundancy/illness derailed my existing plans | 8% | 17% |
| I did not want to keep working and I needed additional money to allow me to stop | 5% | 8% |
Kay Westgarth, head of sales at Standard Life Home Finance, said: “While historically some people have been comfortable pigeon-holing equity release as a product of last resort, speaking to customers who have taken out equity release or seriously considered this option, you can clearly see that this is not always the case. Instead, it is frequently being used as a financial planning tool, a springboard to achieving retirement ambitions or an opportunity to support the wider family.
”Whether a person uses their housing equity as an inheritance, part of their retirement planning or both, we need to ensure that people take the time to consider what role their largest asset could play in retirement. By speaking to a specialist adviser, people can ensure they make sensible, long-term, sustainable choices in later life that will provide them with a lifetime of possibilities.”
Having identified a financial shortfall, 40% of over-55s who went on to take out equity release initially felt pensive about their finances and took the time to consider their financial options. 19% felt confused as they didn’t know how to secure the funds they needed, and 18% were worried as they knew how much money they needed but didn’t have it. Only 3% were confident when they found they would need additional money to meet their needs.
Rather than purely focusing on equity release, 25% had considered downsizing, while 20% contemplated using their savings. Others looked at working longer (17%) or taking out a personal loan (19%).
Those who did not take out equity release – potentially as they were a slightly younger cohort – were more likely to look at working longer (+6% to 23%), downsizing (+1% to 26%) and using their savings (+4% to 24%).
| What options did you consider when you needed additional funds? | Took out equity release | Didn’t take out equity release |
| Downsizing | 25% | 26% |
| Using my savings | 20% | 24% |
| Working longer | 17% | 23% |
| Taking out a personal loan | 19% | 21% |
| Giving up on the idea and simply continuing | 14% | 13% |
| Speaking to my lender about extending my mortgage term | 6% | 11% |
Westgarth added: “While a good adviser will run through all of a customer’s options at their appointment, it is interesting to note that even before they speak to someone many people are aware of the different choices they face.
“Specialist advice is still vitally important but working with customers who have already started to think about their options makes the advice process smoother.”
Jim Boyd, CEO of the Equity Release Council, added: “These findings show that modern equity release is flexible enough to provide a suitable solution in a variety of circumstances.
“While this versatility can prove valuable when unforeseen life events crop up, releasing equity is increasingly used for wider later life financial planning by well-advised homeowners who are fully versed in the range of options available to them.
“Specialist advice is vital to help people judge the right time to pull different levers, from cashing in investments to downsizing or using equity release to improve their quality of life without needing to move.”