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Friday 18th September 2009
Equity release could increasingly fund retirement in the future
Housing wealth could play a greater role in supporting retirement in the future, the Pensions Policy Institute (PPI) has said.
A report published on 15 September by the Pensions Policy Institute, commissioned by Prudential, shows housing wealth could play a greater role in funding retirement moving forward but not everyone has property to pull on.
Those who do have housing wealth do not always view it as a way to save for retirement, the report concludes.
Niki Cleal, director of the PPI, said: "The main way that home ownership supports retirement for many people is to reduce living costs in retirement. "Owning your own home in retirement can reduce living costs relative to paying rent (not having any housing wealth) by around 30 per cent for a single person and by around 40 per cent for a married couple. "This research shows that if current demographic and homeownership trends continue, the number of households where the head is aged over state pension age with higher value housing wealth - which could be used to release equity to support retirement - whether by downsizing or using commercial equity release products - could increase by a third, to 5.2m households by 2030. "There may still be a number of barriers to the use of housing wealth to support retirement: many people are emotionally attached to the family home or may wish to leave the home as a bequest. Pensioners may also be concerned about the costs and risks of releasing housing equity."
Keith Haggart, director of lifetime mortgages of Prudential, said: "During retirement, income needs change. At retirement people spend more money on leisure and require a higher level of income. "This need for income falls as travel costs reduce and then rise again in later retirement as health costs increase. "However, for most people their income is fixed or rises only in line with inflation."
Source: Financial Times, FTAdvisor.com