By David Burrowes, Chairman of the equity release council
Amidst all the other big policy challenges of 2020, one that does not go away as we head into a new year is how do we pay for retirement? A new report recently by the Equity Release Council and key equity release advice specialists, entitled “Pension / Property Paradox: Revisiting the Retirement Confidence Gap,” takes a look at trends in older homeowners’ retirement financial plans and confidence levels over the last year. There were some interesting findings, most notably the challenges that women face in later life.
We found that women approaching retirement are facing a confidence conundrum: they are the most anxious about being able to afford a comfortable retirement, yet are the least likely to consider alternative funding options to plug the gap. In total we found the proportion of homeowners aged 55+ who worried about running out of money in retirement has increased to over a third (34%), up from 27% a year earlier. Notably, these concerns are rising fastest among men, up nine percentage points over the last year to 32%. However, women who are still working remain the most anxious (48%) – the highest proportion of any group in the study.
Our research also highlights that women feel they have less power over choosing when they can retire. Less than half (41%) women still working are confident they will be able to afford to choose when they retire, compared to a majority (56%) of men still working. This report leaves us in no doubt that older women in work are experiencing an acute crisis in confidence about achieving a comfortable retirement. Women are faced with a disproportionately bigger challenge in building a nest egg for later life. This is driven by the perfect storm of longer life expectancies and gender differences in earnings, savings and working patterns. Yet despite this, women are also less likely than men to consider later life lending products when facing a retirement funding shortfall.
A more holistic approach to financial planning is needed now more than ever, as an over-reliance on pensions alone will make it harder to maintain living standards in later life. Looking ahead, there are important steps we can take to help strengthen people’s confidence ahead of retirement. Encouraging them to consider a range of funding options could improve their prospects of achieving greater financial security. The scale of untapped potential in the UK’s property wealth is substantial and has an important role to play. Our industry, Regulators and Government can all play their part to ensure more consumers heading into retirement in 2021 are supported in making decisions that will suit their needs in both the short and long-term.