Pension freedoms and fund shortfalls will increase take up of Equity Release
Barely a week after the new pension freedoms came into effect there’s already new research to show that Equity Release will have a major role to play in the new pension’s landscape. A recent survey has shown that retirement savers are aiming for an average income of £13,100 from their private pension funds which, on present annuity rates, would require a ‘pension pot’ of around £267,000.
Those surveyed however had an average of only £59,000 in their pension savings fund – a long way short of the £267,000 required. Even if the State Pension is included a fund of £118,000 would be required to deliver the balance and achieve a £13,100 annual income.
In this situation many people will be looking to access the significant proportion of their overall wealth that is tied up in their property – through taking up an Equity Release Plan. Indeed it can be argued this trend has already started – there was a 29% increase in Equity Release lending in 2014 as compared with 2013 according to the Equity Release Council.
Richard Espley Head of Equity Release commented:
“Increasingly commentators are noting that Equity Release plans are playing a significant role in retirement planning. People are already thinking more broadly about how to finance their lifestyle as they approach retirement. The new pension freedoms encourage more holistic thinking and so I would expect to see more people choosing to release property equity to form part of their pension income.”
Content correct at time of publication