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Catch up with the latest press releases from LV=

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Home is pension for a third of retirees

Press release: 28/09/2011

  • Rise of the HIPpies ('Home is Pension') generation: two million over-50s are planning to use equity in their property to help fund their retirement.
  • Homeowners nearing retirement say on average £24,651 has been wiped off their property value in the last three years (totaling £56 billion).
  • Stock market falls have led to nearly half (45%) of over-50s considering alternative sources of income for their retirement.
  • A fifth of over-50s are considering an equity release product to access the equity in their homes.

Retirement specialist LV= today reveals that a third of over-50s (31%, two million people) look set to use the equity in their home to help supplement their retirement income in the future, up from 1.5 million people in 2010 - dubbing them the HIPpies generation ('Home is Pension') [1].

The 2011 LV= HIPpies report shows that 36% of over-50s still working say they will need to delay their retirement for financial reasons, and 16% say they would rather not think about their retirement finances at all. The volatility in stock markets in recent months has had a considerable impact on investments and retirement savings. In fact the research shows that nearly half (45%) of those approaching retirement are considering alternative sources of income for their retirement in light of stock market falls. Only a fifth of over-50s (21%) believe that they are financially on track to retire as planned.

Over a third (35%) of home owners over 50 estimate that the value of their home has fallen in the last three years by an average of £24,651, totaling £56 billion[2]. Despite this, an increasing number are planning use the equity in their home as part of funding their retirement – two million over-50s in 2011 (31%), compared to 1.5 million in 2010 (23%). A further 13% said they will take advice on releasing the equity in their property as they approach retirement.

When considering how they would access the equity locked up in their home, over half (52%) said they would downsize to a smaller home, while a fifth (20%) would move to a less expensive area. A fifth (19%) said they would use an equity release product.

The fall in property prices has caused many of 2011's HIPpies to consider alternative options. Over a quarter (26%) are trying to save extra money where they can to offset the drop in value of their home, although this figure was considerably higher at 35% in 2010. Many over-50s whose property has fallen in value are also looking at ways to maximise the amount of equity that could be released. A quarter (25%) are planning to wait for their property to increase in value again before using its equity, and one in ten (11%) are focusing on making improvements to their home to help increase its value.

Despite the recent volatility, 54% of over-50s would still recommend that their children invest in property for their retirement. Just below this is recommending saving into a pension plan (53%), followed by cash savings (43%).

Vanessa Owen, LV= Head of Equity Release commented: "The UK economy is still facing an uncertain future, with rising inflation, low interest rates and volatility in global stock markets, so it is understandable that those approaching retirement are feeling vulnerable. Combined with the fact that for many, their home is their biggest asset, releasing equity from a property is an option that an increasing number of over-50s are now considering."

Weathering the storm

Although some homeowners are worried about an interest rate rise, research from LV= shows that nearly a third (32%) of homeowners aged over 50 said a rate rise would be welcome, as the higher interest on their savings would outweigh any negative effects.

At the other end of the spectrum, 27% wouldn’t welcome a rate rise as they would have to reduce their pension contributions to make sure the higher cost of servicing debts such as mortgage repayments, credit cards and loans could be met. This figure is down on 2010 which saw 33% of over-50s fearing a rate rise.

With the pressure of low interest rates on savings and increased cost of living, almost one in five (17%) over-50s have decreased their long term savings over the last year by an average of £342 a month or £4,104 per year[3].

Vanessa Owen concluded: "The equity locked in your home should be a prime consideration when looking at how to fund retirement. Planning ahead and discussing every available option is key to securing a comfortable retirement. The equity release market has changed radically in recent years, with new types of products entering the market offering greater flexibility and transparency. If you are considering using your property as part of your retirement funding then it is important to speak to a specialist financial adviser."

How equity release can help

For those who would ideally like to stay in their own home and not downsize or move, they can do so by using a suitable 'equity release' or 'lifetime mortgage' plan. However, this is a decision that should only be taken after careful consultation with family members and a professional financial adviser.

LV='s lifetime mortgage enables homeowners from age 60 to release equity from their property from £10,000 upwards. The flexible lifetime mortgage allows homeowners to release a cash sum initially, agree a guaranteed credit limit to draw on in future and free revaluations to take account of any increase in property value.

Notes to editors

[1] All 2011 figures taken from research carried out for LV= by Opinium Research from 1 September to 5 September 2011 amongst 1,051 UK adults aged over 50 and in employment.

All 2010 figures taken from research carried out for LV= by Opinium Research from 15 September to 20 September amongst 1172 UK adults aged over 50 and in employment

According to the 2010 ONS Labour Force Survey there are 8,049,000 over 50s currently in full or part time employment.

  • 81% of over 50s still working surveyed own their own home (Opinium Sept 2011 research) – 81% x 8,049,000 = 6,519,690 (6.5 million)

  • 31% of those over 50 still working who own their own home are planning to use the equity/value of their home or will probably do this at some point in retirement. 24.8% x 8,049,000 = 1,996,152 (2 million)

  • Based on 2010 research, 23% of those over 50 still working who own their own home are planning to use the equity/value of their home or will probably do this at some point in retirement. 18.2% x 8,049,000 = 1,464,918 (1.5 million)

[2] 34.7% of over 50s who are homeowners and who have not retired say their property has decreased in value. The average value wiped off properties is £24,651

  • 81% of over 50s still working surveyed own their own home (Opinium Sept 2011 research) – 81% x 8,049,000 = 6,519,690 (6.5 million)

  • So 34.7% of the above x 6,519,690 = 2.26 million x £24,651 = £55.7bn.

[3] All figures taken from research carried out for LV= by Opinium Research as part of the State of Retirement Report. An online poll of 1,541 UK adults, all aged over 50, was carried out from 5-9 May 2011.

About LV=

LV= employs over 4500 people and serves over four million customers with a range of financial products. We are the UK’s largest friendly society and a leading financial mutual.

When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

We offer our services direct to consumers, as well as through IFAs and brokers, and through strategic partnerships with organisations such as ASDA, Nationwide Building Society and a range of trades unions.
LVFS is authorised and regulated by the Financial Services Authority, register number 110035. LVFS is a member of the ABI, the AFM and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.