In a recent survey conducted by Stonehaven, 74% of advisers think that more retirees should consider their property as part of their asset mix when looking at funding their retirement.
The same amount of advisers also expect that equity release will become more important among the over 55s following changes to the annuity market.
The reason behind advisers’ views that retirees should include their home when reviewing their asset pool is largely as a result of the pensions changes announced by the Chancellor last year, which gives retirees more control over their pension pots.
Recent figures from the Equity Release Council show that equity release hit its highest annual lending level ever recorded last year with a figure of £1.4bn. However, from April 2015 these figures could be dwarfed as the majority of advisers surveyed agreed that retirees will start to view withdrawing property income to fund their retirement as normal practice (88%).
Enhancing quality of life is expected to be the most prominent reason for growth in the equity release market after April 2015. Many predict that retirees will use the capital locked in their homes to enjoy luxuries such as travel (73%). Unlocking capital to cover day-to-day living expenses after exhausting their pension pot was also at the top of the list (70%).
Using equity release as a primary income is the second most popular reason for unlocking equity in property (70%). With additional freedom to withdraw pensions as and when it is needed, many retirees will use up their pension pots faster than expected as they try to keep up with the rising costs of living to maintain their quality of life.
More than half of advisers believe that an increasing number of retirees exposing themselves to the risk of the stock market will drive a heightened demand for equity release products (51%), as income drawdown and underperforming funds diminish the value of their investments. Retirees could see equity release as a means to mitigate their market risk exposure by providing them with the ability to top up underperforming investments and restore their level of income.
Alice Watson, Product and Communications Manager, Stonehaven, said:
“We are entering a period of uncertainty in the pensions market as retirees are afforded new freedoms to spend their savings as and when they wish. While this flexibility is good news for savvy retirees, recent research has shown that a number of retirees may choose to use their pension pot for luxuries and gifting to family instead of using it for an income over the long-term.
“Retirees may find that their calculated expenditure cannot keep up with the rising cost of day-to-day living or that buying a well-earned holiday in retirement is stretching their finances a step too far.
“Equity release is fast becoming the runaway success story of the UK mortgage market, and providers can boast an increasingly flexible and transparent product which the industry can be proud of and sell with confidence.”
Call us now on 01204 884545 for more information on Equity Release Plans