Just Retirement, the equity release provider, conducted the biggest piece of consumer research to date on housing equity withdrawal and found that the average retiree believes they need an annual income of £17,000 for a decent quality of life.
Steve Lowe, group director of external affairs and customer insight at Just Retirement, said advisers are best placed to help consumers work out how to plug the gap between the income they need and the income they will get from annuities and the state.
He said: “Advice has a crucial role because it helps overcome misconceptions about how equity release works and highlights the consumer safeguards in place.
“At the moment people don’t know about it – nine in 10 can’t name a provider and more than four in 10 don’t know where to seek advice.”
Lowe said there is “huge potential” for advisers to talk to wealthier clients about using equity release as part of their total retirement plan.
Of those in social classes A and B, 3% had already bought plans. And 29% had heard about equity release in a positive way.
“Looking at those with homes valued at £250k-£500k, we found only 2%actually had plans,” said Lowe.
“But some 32% had heard of the concept but didn’t know the detail. That seems like a huge opportunity for financial advisers to engage with a group who have significant housing assets.”
It is estimated that about 84% of homeowners in their 60s and 70s own their own homes and the majority have at least £200,000 housing equity.
Although most of the homeowners questioned were aware of downsizing as a way to release the value tied up in their homes people also recognised this could result in high financial costs as well as the emotional costs of leaving homes and neighbourhoods.
Lowe added: “The survey shows that people approaching retirement – between one and five years out – are keener on the idea of selling up at some point than those who are actually retired and closer to making the decision.
“More than half of the younger group said they would rather downsize than use equity release but this fell to just over a third of those in retirement.”
The equity release market currently only reaches a small proportion of those who could benefit, argued Lowe.
The report calls on the government and industry to work together to give people the knowledge and confidence to consider using these products as part of the solution to managing financial commitments later in life.
Lowe said: “The arrival of hundreds of thousands of income-depressed baby boomers, many of whom will still need to make mortgage repayments in retirement, creates significant demand for professional financial advice.
“Advisers are increasingly showing people how they can top up their retirement income through careful and considered use of all of their assets, including their home.”
The report was formally unveiled by Just Retirement and independent think tank Reform at a Parliamentary event this week attended by MPs, government officials, third way organisations and leading equity release professional advisers.
The detailed findings are available at www.ERresearchcentre.org from 14 July.
It will be followed up in the autumn by a major Just Retirement-sponsored macro-economic study by Oxford Economics into the impact a growing equity release market would have on the UK economy.
