Research from international financial services group Canada Life suggests three quarters of homeowners planning for their retirement are not factoring in equity release from property.
The survey of 2,000 adults aged 40 and over found that just 7% of homeowners who had discussed retirement plans with a financial adviser had been presented with equity release as an option, and only 6% said they’d brought up the topic. Three quarters (76%) said they hadn’t discussed equity release with their financial adviser at all.
Despite property representing a major source of household wealth, and 73% of respondents being familiar with equity release, Canada Life found that misunderstandings and misconceptions are common.
Two thirds of respondents (67%) were unaware a home could be passed onto children after equity had been released, and 63% didn’t know you could move house.
The majority of respondents (82%) weren’t aware of the Equity Release Council’s mandatory no negative equity guarantee, while 42% incorrectly believed releasing equity could result in owing more than the house is worth.
“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,” Pete Maddern, managing director of retirement at Canada Life said.
“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.”
