As we age, our financial needs and priorities evolve. Whether planning for a comfortable retirement, supporting loved ones, or enjoying the rewards of a lifetime’s work, having flexible financial options can make a significant difference. At Royal London Equity Release, we understand these shifting needs and are committed to helping you explore how you can enhance your retirement.
The changing landscape of retirement
Retirement today looks very different from how it did for previous generations. With people living longer and healthier lives, many of us need to plan for a retirement that could span several decades. While this is a positive development, it also presents challenges, especially if savings and pension pots are not as substantial as hoped.
A growing number of people are carrying mortgage debt into retirement or continuing to work past the traditional retirement age. The increase of State Pension age from 65 to 66 in 2020 has led to a significant increase in employment rates for 65-years-olds, but in doing so, it has reduced average incomes for this age group. It is estimated that increasing the State Pension age from 65 to 66 increased the absolute poverty rate of 65-year-olds from 10% to 24%. According to a 2022 report, the rise resulted in a significant drop in income for those aged 65, with average household incomes falling by around £50 per week.
If you find yourself with less income or fewer savings than anticipated, it’s essential to know that options are available to ease financial strain. One such option is equity release. This financial product is designed to help you unlock the value of your home, providing you with additional income or a lump sum to support your needs.
Why consider equity release?
Equity release allows you to access the value tied up in your home without having to sell or move and may be a suitable option for those looking to supplement their retirement income, pay off existing debts, or even help family members with significant expenses, such as buying a home or funding education. These products are designed to be flexible and can be tailored to meet your specific needs. In the UK, property values have generally risen over the years, making many retirees’ homes their most valuable asset. Releasing some of this value can provide the financial freedom to enjoy your retirement more fully.
The evolution and future of later life lending
Looking ahead, property wealth is set to play an increasingly important role in retirement planning. As final salary pension schemes become less common, many retirees are finding that their pension income alone is insufficient to meet their needs. The current full State Pension is £221.20 per week, equating to £11,502 per year—below the £14,400 needed by a single person to achieve the minimum living standard, with couples requiring £22,400. To support customers, the market now offers a wider range of products to meet varying needs, with innovative products that offer greater flexibility. While equity release remains a popular option, hybrid products combine features of traditional mortgages and equity release products. Such products may allow homeowners to tailor borrowing to suit their individual needs.
The market has also seen progress in the flexibility of product features. These enhancements allow consumers to manage their borrowing more effectively, ensuring they can achieve financial goals while preserving their wealth for future generations. In addition, the industry is harnessing technology, and it’s now easier than ever to explore options and compare products online.
Navigating market challenges and seizing opportunities
Despite positive trends, the later life lending market has faced challenges over the past two years. Inflation, rising interest rates, and the cost-of-living crisis have led to a drop in completions and borrowers are becoming more cautious, opting for smaller initial advances with larger amounts held in reserve.
However, while the number of completions has decreased since the mini budget of 2022, the market remains resilient. New lenders are entering the space, increasing competition and driving product innovation. Royal London Equity Release is one of the most recent lenders to enter the market. Royal London was founded in 1861 and is the UK’s largest pension, life and investment mutual. In 2024, we launched our first self-funded equity release product, reflecting our confidence in the future of this market and our commitment to supporting customers. Royal London is well-positioned to bring to market an equity release lender and a range of innovative and flexible products that meet the diverse needs of today’s retirees.
The importance of professional advice
Making any financial decision, especially one as important as equity release, should never be taken lightly. It’s crucial to get professional advice from someone who understands the complexities of the market and can guide you through the options available, providing the personalised advice you need to make the best decision for your circumstances.
Your adviser will take the time to understand your needs, explain the different products available, and help you weigh the pros and cons, including how releasing equity from your home will reduce the value of your estate and could affect your entitlement to means-tested benefits. This personalised approach ensures that you can make an informed decision with confidence, knowing that your best interests are at the heart of the process.
A final thought
Retirement should be a time of comfort, relaxation, and enjoyment—a time to reap the rewards of a lifetime’s hard work. If you find yourself facing financial challenges or simply wanting to enhance your quality of life, equity release could be the key to unlocking new opportunities. With the right advice and support, it can be a positive and empowering choice.
