Pensions "crushed" by falling house prices
20/08/2008
With property prices falling at the fastest rate since the 1990s crash, many older people are seeing their pension hopes diminish before their eyes as they were relying on equity in their homes to support their retirement, leaving some seriously struggling.
According to a new poll by Intune, provider of financial products and services for older consumers set up and owned by Help the Aged, over three quarters (77.77%) of respondents that are retired or approaching retirement are worried about having enough income to live on. Two in five (44.16%) are being affected by the current falling property market and over one in ten (13.48%) aged 60+, saw their home as their pension. Many were planning on using their home to fund their retirement either by releasing equity or downsizing their home to live off the difference.
For a third (38.96%), the rising cost of living with increasing fuel, food and energy bills means their pension is no longer enough and consequently many are relying on their property to fund their retirement more than ever. One in five (22.47%) don’t have a sufficient pension to enjoy the retirement they want and now face tough choices as the strain on their finances takes its toll. Nearly a quarter (23.33%), are having to reduce their expenditure to enable them to live within fixed income levels. To help them survive, some respondents (6.81%) are resorting to taking jobs or setting up businesses to supplement their income.
Stuart Castledine, Managing Director of Intune, says: “With the rising cost of living, many are relying on the equity in their homes to see them through retirement and many will unfortunately see a shortfall in the current economic climate reducing their financial cushion. While equity release is not suitable for everyone it can be helpful for some. Our own research shows that nearly two thirds of respondents aged 60+ have up to £300,000 worth of equity in their homes and releasing a proportion of this could provide a more comfortable retirement for some and help others keep their heads above water.”
Before considering equity release, Intune advises people to look at other options first such as family support or moving house and always advises where equity release is not considered appropriate. However, it recognises that Equity release can provide some people with more flexibility in their finances and can be a safe and practical way of unlocking some of the money that’s locked up in your home. It is essential to obtain independent financial advice before making any decisions about equity release.