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According to new research from the Equity Release
Solicitors' Alliance (ERSA), more people are considering equity
release as a source of funding once they are retired. However, new
research shows that people are becoming increasingly receptive to
the idea of equity release, according to the Equity Release
Solicitors' Alliance (ERSA). The research found that people are
not saving enough for their retirement and don't understand how
much money they need to put aside.
At current rates, people need a lump sum of around
£200,000 to generate the UK average net annual retirement
income of £16,332, according to Aviva's Real Retirement
Report Q2 2012. This is equivalent to a net monthly income of
£1,361. But just one in four respondents think they will be
able to save this amount before they retire. ERSA found 46% of
people are currently saving nothing at all and 32% are saving less
than £250 a month.
While 16% of people said they would definitely use equity
release or are quite likely to, when presented with the above
figures 34% said they are now more likely to consider an equity
release scheme or are definitely intending to use one.
Highlighting the benefits of equity
release
Claire Barker, chairman of ERSA, said: "The findings
demonstrate there is a huge lack of awareness over how large a lump
sum is needed to fund a retirement income. This is causing people
to drift into retirement without adequate funding.
"While more work still needs to be done to educate
consumers about retirement planning, the good news is that the more
informed people are, the more likely they are to consider using the
equity built up in their home to fund their retirement.
"With three quarters of people not sure they will be able
to save enough to live comfortably in retirement, they will need
careful independent financial advice as to their
options."
Changing mindsets
A willingness to consider an equity release mortgage is highest
among younger age groups (54% of 16-24s and 39% of 25-34s).
However, despite being close to retirement 44% of 55-64 year olds
are currently not saving anything each month (see table
below).
Breakdown of attitudes towards retirement finances and
equity release by age group
Age
16-24
25-34
35-44
45-54
55-64
65+
Think they will save money
24%
19%
20%
27%
30%
38%
Considering equity release
54%
39%
39%
27%
19%
14%
Currently saving nothing
63.9%
47.2%
42.9%
38.6%
44.3%
54.2%
There are also key differences between how men and women feel
about equity release. While men and women are similar in terms of
how likely they are to use an equity release plan, women are more
likely than men to be undecided (40% vs 32%), which is possibly
because they have lower financial expectations in retirement (24%
of men say they would need more than £2,000 a month compared
to 21% of women).
Claire Barker said: "There is a clear benefit to engaging
with retirement planning sooner rather than later, but attitudes
towards equity release are increasingly positive. "The younger
generations are less confident they will be able to save enough to
live comfortably in retirement and are more receptive to equity
release, but the numbers of people approaching retirement with
inadequate savings is still worryingly high."
Source: Mortgage Finance Gazette, 9 July 2012 - The
general public is burying its head in the sand over how much they
need to save to fund themselves in retirement
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