Fairer Finance today published its Retirement Compass: The Later Life Finance Index, commissioned by the Equity Release Council, which found housing wealth does not necessarily translate into adequate retirement income.
The report found that 3.7 million homeowner households aged 55-79 are projected to have retirement income below the Pensions UK moderate retirement living standard, representing 46% of homeowner households in that age group.
James Daley, managing director of Fairer Finance, said: “While a growing number of people are approaching retirement without enough pension savings, many of them are sitting on housing wealth that could unlock a better retirement. Single women in particular often have the biggest income gap in retirement, but our data shows that on average, they have no less housing wealth than single male households.”
Single women disproportionately impacted
Single women represented a larger share of new equity release plans than their share of the homeowner population, accounting for 32% of new plans compared with 29% of homeowners aged 55-79.
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Of the 3.7 million homeowners projected to fall short of the moderate retirement standard, 1.4 million are single female homeowners, compared with 600,000 single men.
However, the report found that both single men and single women have the same median housing wealth at retirement of £275,000.
The report also highlighted that housing wealth is not always matched by retirement income. Among couple households with housing wealth of between £200,000 and £399,999, 44% are projected to have retirement income below the moderate standard.
For those with housing wealth above £400,000, 21% are projected to fall below the benchmark, equivalent to around 400,000 households.
Plus, single women accounted for 39% of new customers in London, versus between 28% and 33% across other regions.
Few consider equity release
Despite seven in 10 homeowners aged 55-79 saying they were aware of equity release products, only 13% had considered taking one out.
The research found that 14% would explore equity release or a later life mortgage if they needed to supplement their retirement income.
At the same time, attitudes towards borrowing in later life appear to be changing, with 56% of homeowners aged 55-79 saying having a mortgage in retirement is becoming more common.
Regional data showed London accounted for 15% of lending despite representing only 7% of plans sold, while the South East accounted for 28% of lending and 22% of plans.
Jim Boyd, chief executive of the Equity Release Council, said: “The report shows it is no longer sustainable to plan for later life through the narrow lens of traditional pensions; and it is simply not true to claim that people with poor pensions wealth also lack other assets and resources to provide a better quality of life in retirement.”
He added: “The report highlights that many people in the South, Midlands and North of England are actively considering using their important asset to pay for care or boost pensions income.”
Commenting on the findings, Will Hale, chief executive of Air, said: “In terms of regulation, more assertive intervention is needed from the FCA in order to improve outcomes. At the very least, more specific guidance outlining what it expects from those delivering mortgage advice for customers over the age of 55 would be helpful.”
Dave Harris, chief executive of More2life, said: “We have been clear that the only way to ensure the best outcomes for consumers is to make it mandatory for both mortgage brokers and financial advisers to flag specialist later life lending products, such as lifetime mortgages, to their clients.”
