No matter how much one earns, it never seems to stop the idle daydreams of how even a small increase in one’s monthly or annual pay packet would make life just that bit easier or more luxurious. However, the global financial uncertainty of the past few years seems to have pushed aside much of this fantasising, with many shelving ambitions of promotions or pay rises and instead expressing gratitude that they remain in steady employment.
This has not only affected many peoples’ current plans, but also seems to be affecting peoples’ plans for the future if the latest figures from CoreData Research’s Pensions and Retirement Report is to be believed. Its poll of more than 1,500 UK consumers found that the average individual’s expectation for how much annual income they envisage requiring in retirement has fallen considerably over the past two years.
The Joseph Rowntree Foundation currently sets the minimum income standard for a single person in the UK at £15,600 and respondents to the CoreData survey this year modestly forecasted their anticipated retirement requirement at £18,000 per annum. However, rewind back to 2010 when the charity’s breadline was at £14,400 and the average consumer thought they needed almost double that (£27,948) to survive on annually once they reached retirement.
Breaking this down to a monthly figure, this means that individuals in 2012 expect to be able to get by on just over £1,500 per month in retirement as opposed to the £2,329 forecasted in 2010. While this could be interpreted as consumers being more realistic about their retirement and putting plans for luxury cruises or conservatories on the back burner, it also shows that many individuals don’t expect to have much of a cash cushion to fall back on once they stop working. Factor in rising costs of living, increasing energy bills, dwindling state pensions, potentially unforeseen costs (boiler repair, car accident, etc) and the issue of long-term care or medical expenses, and £1,503 per month suddenly doesn’t seem like very much money at all.
One option for those nearing retirement age that are looking to supplement their income is of course equity release. After all, it makes little sense to be struggling to make ends meet while also sitting on an untapped resource that could afford some more breathing space. The perception of the equity release market continues to improve each month, with the recent Equity Release Council trade body relaunch and positive national press coverage helping the sector to improve its standing and spread the message of its benefits to a public that remains uneducated to the full possibilities of home reversions and lifetime mortgages.
Attitudes towards inheritance among the older generation are also softening, with a growing number of mature homeowners no longer feeling compelled to leave their properties to children who are already financially secure, making the prospect of accessing built-up equity while they can still take advantage of it a more palatable prospect.
Faced with such an insurmountable body of compelling factors and circumstances, the least that advisers and their clients can do is consider equity release as an option when making their later life plans.
Chris Prior is business development manager at Bridgewater Equity Release