Monthly Archives: August 2020

Home is where the heart and tax-free wealth is!

Preferring to remain in their own homes for as long as possible is, for many people, increasingly becoming an important part of how they view older age. There may be several reasons for this: to keep the family home, stay close to friends or remain in comfortable and familiar surroundings.

The majority (80%) of over-55s questioned in a recent survey said they would opt for equity release instead of moving home[1] and downsizing.

Choosing not to downsize

In addition, of more than 1,000 UK adults who have taken out equity release, nearly one in ten (9%) said the reason they chose not to downsize was because of the cost associated with moving, including stamp duty.
The average cost to buy and sell a property in the UK was £10,2101[2] – this includes an average bill of £1,800 for Stamp Duty.

Physical and emotional stress

Moving comes with both physical and emotional stress, and many older people are afraid of leaving behind beloved neighbours and a family home full of memories. Add the fear of the unknown to those concerns and a move to senior living can be overwhelming.

For an increasing number of people, property, often the home they live in, is also the answer to freeing up extra money, either to supplement income in later life or to gift to loved ones.

Negative equity guarantee

The research suggests that the emotional aspect of remaining in your home is what leads many to opt for equity release. A lack of supply, the pressure of moving and the costs of downsizing mean for many, it is not always a practical choice.
71% of people claimed the ‘no negative equity guarantee’ influenced their decision to take out equity release. All equity release plans which are approved by the Equity Release Council include what’s known as the ‘no negative equity guarantee’, which ensures those releasing equity will never owe more than their home’s value.

Supporting lifestyle in later life

While downsizing can work in both a practical and financial sense for some, the ‘no negative equity guarantee’ means remaining in your home is a viable choice  for many looking to use the value of their property to support their lifestyle in later life.

Equity release can be a financial lifeline for older people who find themselves in need of cash, often living on small incomes despite living in properties worth hundreds of thousands of pounds. More and more people are using equity release to help enjoy a comfortable retirement, pay down debts, boost their income or plan capital expenditure.

Source data:

[1] Standard Life and Age Partnership clients were emailed with an invitation that contained a link to an online survey. 1,084 customers took part the survey.
[2] https://mybigmove.co.uk/cost-of-moving-house2 – 2018

EQUITY RELEASE PRODUCTS INVOLVE BORROWING AGAINST OR SELLING PART OF YOUR HOME. THERE MAY BE MORE SUITABLE METHODS OF RAISING THE FUNDS YOU NEED.

A LIFETIME MORTGAGE CAN QUICKLY ERODE THE REMAINING EQUITY, AND AS A RESULT THERE MAY BE NO VALUE LEFT TO PASS ON.

EQUITY RELEASE MAY REQUIRE A LIFETIME MORTGAGE OR HOME REVERSION PLAN.
TO UNDERSTAND THE FEATURES AND RISKS, ASK FOR A PERSONALISED ILLUSTRATION.

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Don’t let coronavirus derail your financial future

The COVID-19 pandemic has touched virtually every aspect of our lives, not least of which is how we save for retirement. And while the number one priority is keeping our families and ourselves safe and healthy, the next topic on most people’s worry list is the financial impact, especially if the situation doesn’t improve quickly.

As global markets have been highly volatile, the planning towards achieving our retirement goals may now require readjustments. The current situation has led to one in ten people reducing or stopping saving into a pension because of the pandemic.

Most financially affected

Those who already struggle to put away for retirement are most financially affected by COVID-19, including self-employed, part-time and younger workers. More than three million people have reduced or stopped completely their pension payments as a result of the COVID-19 crisis, new research has revealed[1].

10% of UK adults who have a pension and are not yet retired will need to work for longer or significantly increase how much they save later on in order to make up the shortfall, the findings of the research highlight. Those who don’t could potentially face pensioner poverty in later life.

Short and long-term personal finances

Conducted in the midst of the lockdown, the research looks at how the crisis is impacting the short and long-term personal finances of the nation. It revealed that almost a quarter of workers (24%) are worried about paying for essentials like food and energy.

Another 20% are concerned about paying the rent or affording their mortgage. In total, almost one in five (19%) say they have seen their income fall because of coronavirus. These short-term financial concerns are impacting long-term saving, with 10% reducing pension contributions or stopping saving completely.

Painful lack of financial resilience

The COVID-19 crisis has revealed a painful lack of financial resilience in the UK, leaving millions of people exposed with little or no safety net to fall back on. As the full impact of this crisis becomes clearer, more people may feel forced to pay for today’s essentials with tomorrow’s savings. However, this will only prolong the economic pain of coronavirus and could result in more people facing poverty in retirement.

Those who have traditionally struggled to save adequately for retirement before now are also being disproportionately affected by COVID-19. Two in five self-employed workers (43%) have seen a drop in their income, almost three times the proportion of employees (16%).

Not saving anything towards retirement

While the Government’s Self-employment Income Support Scheme will help cover some of these lost earnings, those who have been self-employed for fewer than two years will receive even less support.

As a result, one in five (19%) self-employed workers have felt the need to pause or reduce pension contributions. This is on top of the 41% of self-employed people who in 2019 said they were not saving anything towards retirement.

Reduced or stopped pension contributions

Part-time workers also tend to be less well prepared for retirement, and now three in 10 (28%) have lost their job or been furloughed due to coronavirus, compared with 18% of full-time workers. Because of this, part-time workers are two-and-a-half times more likely to change their long-term savings habits than full-time workers (15% as opposed to 6%).

The nation’s youngest workers are also sacrificing their long-term financial plans. Almost one in five (18%) 18-24-year-olds have reduced or stopped pension contributions. Of this age group, 7% have actively moved their pension to a lower risk investment fund, despite being many years away from retiring.

Women who are not yet retired are more worried about paying for essentials than men (27% as opposed to 22%), and are more concerned about paying the rent or mortgage (22% as opposed to 18%).

Source data:
[1] Research was carried out for Scottish Widows online by YouGov Plc across a total of 2,251 adults aged 18+. Data is weighted to be representative of the GB population. Fieldwork was carried out 11–12 May 2020. More than 3.1 million (3,135,601), calculated as 5.9% of the adult population (52,673,433), have reduced or stopped paying into a pension (equal to 10% of workers who have a pension).

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles