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4.8 million retirees are 'going without'

Press release: 10/09/2015

  • A third (32%) of over-65’s incomes fall below the minimum wage, yet more than two thirds (68%) of these say they have untapped housing equity
  • Five in six (83%) over-65s own their home, yet 42% of those admit to ‘going without’
  • Over 150,000 (4%) retirees living on less than the minimum wage struggle to pay their utility bills

With people living longer and retiring on smaller pension pots, funding retirement poses a very real challenge for many. In fact, a third (32%) of retirees now live on less than the minimum wage1, yet more than two thirds (68%) have untapped property wealth which they may not have even considered, or don’t realise they could be accessing to fund a more comfortable lifestyle.

According to LV=, two in five of those aged 65 and over (42%) – 4.8 million pensioners2 – have ‘gone without’ due to tight budgets. These pensioners sacrifice items such as holidays abroad (25%), a new car (16%) or dining out (15%), and one in twenty (5%) can’t afford to buy birthday and Christmas presents for friends and family. Regionally, retirees in the South West and East of England are most likely to go without, with those in Wales (5%) and Scotland (5%) most likely find it a struggle to keep up with their utility payments.

Of those retirees whose income is less than the equivalent of earning the minimum wage, the number 'going without' rises significantly (to 54%). Furthermore, one in seven (15%) can’t afford to replace household goods and over 150,000 are struggling with their utility bills3.

It seems that a considerable number of retirees are ‘going without’ in order to stay within budget, however for many help could be closer to home than they realise. LV=’s research shows that five in six (83%) over-65s own their home and are sitting on an average of £235,750 in property equity4, which they could access to have a happier and more comfortable retirement.

However, despite this, only one in 20 (7%) over-65s have unlocked the capital in their property to help fund their retirement. Nearly a fifth (17%) of pensioners incorrectly thought they would pass on debt by using equity release, while nearly a quarter (24%) mistakenly thought that their equity release borrowing could exceed the value of their property. It would seem that misconceptions and low awareness of equity release are preventing people from accessing the money tied up in their home to help them to bridge their pension income gap.

John Perks, Managing Director of Retirement Solutions at LV=, said: “It’s deeply concerning that so many older people are struggling in retirement, often going without life’s essentials but it doesn’t have to be this way. There are many options available and using untapped housing wealth to supplement other incomes is a route worth considering, as it allows you to free up capital and afford the retirement you want.

“It is unfortunate that misconceptions about the way retirees can use their property to plug an income shortfall persist as, in the right circumstances, equity release can be used to help afford retirees a better, more comfortable standard of living. We would always recommend that someone seeks advice from a specialist before taking out equity release.”

1 The National Minimum Wage is £6.50 an hour. According to ONS Annual Survey of Hours and Earnings (2014), the average full-time employee works 39.2 hours week. Therefore, minimum wage would be £254.80 a week, or £13,249.60 a year. This figure was then entered into, which calculates the amount of tax paid in a given financial year. This provided the figure £12,196.93.

2 42% of respondents aged 65 and over have ‘gone without’. If this is applied to the number of people aged 65 and over in the UK (11.4 million - ONS, 2015) then 4.8 million people will have ‘gone without’.

3 According to our research, 16 people aged 65 and over have an income of less than the minimum wage, which is 1.3% of everyone aged 65 and over (16/1204). Applying this to the 11.4 million figure from ONS, 2015 this means that 151, 585 people are struggling to pay their utility bills who fall in this category

4 According to research carried out by Opinium Research on behalf of LV=, the mean value of equity in over 65s’ homes is £235,752.

Notice to editors

The research was carried out by Opinium Research from 27-29 July 2015. The total sample size was 2,042 British adults over 18 years old and was conducted online. Results are weighted to a nationally representative criteria.