Despite property representing a major source of household wealth, equity release is largely still absent from retirement planning discussions, new research1 from Canada Life shows.
Among the sample of homeowners2 who have spoken to a financial adviser about their retirement plans, just 7% were presented with equity release as an option unprompted. Only one in twenty (6%) asked about it, and more than three quarters (76%) reported not discussing equity release with their financial adviser at all.
Including later life lending in financial planning conversations presents a valuable opportunity for homeowners to unlock greater financial flexibility in retirement. The research showed less than half (48%) of homeowners are confident that their savings and income will last through retirement. With property accounting for 40% of total household wealth in the UK 3, exploring ways to access this wealth will be an important part of ensuring financial security in later life.
Canada Life’s findings show that while nearly three quarters (73%) of homeowners are familiar with equity release, understanding and knowledge of the product remains limited, and legacy misconceptions of later life lending persist.
Over two thirds (67%) did not know that you could still pass your home onto your children after you have released equity, and 63% did not know whether you could move house after doing so.
Four in five (82%) were not aware of the No Negative Equity Guarantee, with 42% incorrectly believing you could end up owing more than your house is worth, and 40% not knowing if this was true or false. The No Negative Equity Guarantee is an important feature of equity release products, ensuring that when the property is sold, neither the customer nor their estate will ever owe more than the value of the home. This provides reassurance and protection for both borrowers and their families.
Pete Maddern, Managing Director, Retirement at Canada Life said:
“As people live longer and many individuals find their pension savings falling short, unlocking money tied up in property to supplement pension income is likely to become an increasingly important aspect of retirement planning.
“Furthermore, with unspent pensions set to be included in inheritance tax calculations from 2027, more individuals will be seeking flexible estate planning strategies. Equity release can play a key role in enabling wealth to be passed to the next generation and in mitigating potential inheritance tax liabilities.
“It’s encouraging to see the progress the FCA has made in recent months to explore how the later life lending sector and advice framework should evolve. While equity release will not be right for everyone, these developments have the potential to improve consumer understanding and awareness of later life lending, and to enable advisers to have more holistic conservations with their clients about whether equity release could help them achieve their later life and retirement goals.”
