We often see a change in outlook from generation to generation, and this always seems to come in surprising new ways. The baby boomer generation are now at retirement age and it is their children that are now expectantly awaiting their inheritances. Or not, as it now seems.
Harold Macmillan famously said “you never had it so good”, to those children of the sixties, and quite unexpectedly, it appears he was right. Secured lifetime work, a good pension to look forward to, and cheap housing and energy costs have given us boomers a little edge over our children and grandchildren. People expected financial security and they got it. They also expected an inheritance to some extent and they got it. More importantly though, they expected to leave an inheritance to their children, and for the most part this happened.
On a recent discussion on the Mumsnet forum a user logged in to complain that their parents had taken out an equity release plan to fund their retirement and pre-pay their funeral plans. I was surprised when the majority of other mums felt that this complaint was not justified. That her parents were free to do whatever they needed with the money they had accumulated in their property over their lifetime, and that the complainer was being overly entitled.
This attitude was rather a shock to me, as I assumed that entitlement to inheritance was a standard feeling, especially amongst the middle classes. It seems however that I was wrong.
“My father retired and went on a trip round the world”, says Neil Simmons, Business Manager at AskERIC, the Equity Release Information Centre. “It was a once in a lifetime opportunity, and yes it did cost me some of my inheritance, but that wasn’t something I ever really expected anyway”.
Overly entitled
It seems more and more people are releasing funds from their property as they grow older and equity release is one of the ways of doing it. “It’s not always for aspirational reasons though. People release funds to pay off their existing mortgages and to help their children and grandchildren onto the property ladder. Deposits on new properties are monstrously large compared to what the generation before had to pay, and people realise this. We have had an increase in people wanting to pre-arrange their funerals also. A big concern is helping out their children.”
If inheritance is no longer a big factor in people’s fears about equity release, then what are the risks remaining that hold people back? “ A key belief is that homes are at risk” continues Neil. “When there is no expectation for monthly repayments, it is impossible to go into arrears and therefore impossible to be repossessed. The key risks in taking out equity is the impact on inheritance and a possible impact on any means tested benefits your may receive.
These are areas in which it is important to take specialised independent advice. In the past the reputation of equity release was tarnished by unregulated plans sold in the eighties and nineties. In the modern age, everything we do is regulated by the Financial Conduct Authority and the Equity Release Council. Consumer protection is paramount.
My children seem to be financially independent, but it is nice to know that they don’t expect a big windfall on my passing. I’ll sort out my funeral for them, but just before that I think I’ll look into that world cruise….and that Harley Davidson I always wanted.
AskERIC, the Equity Release Information Centre, can provide a free brochure on Equity Release by calling 0800 077 6885 or visit www.AskERIC.tv. They can also provide information on funeral plans and other aspects of retirement planning. These are lifetime mortgages and home reversion plans. To understand the features and risks ask for a personalised illustration.
