The Equity Release Council has published its Spring 2019 Market Report1 and the numbers are significant.
- £3.94 billion record lending
- 46,397 record new customer plans
- 82,791 record total customer activity
Every six minutes a customer used equity release.
The £3.94 billion of equity release lending in 2018 compares to £7.83 billion taken via the higher profile “pension freedoms” (ie flexible payments from pensions).2
While the total use of the pension freedoms is currently greater than equity release, equity release is winning the growth race.
Since the introduction of comprehensive reporting of pension freedoms data in Q2 2016, this market has grown by an average of 0.71% each quarter – rising from £1.77 billion in Q2 2016 to £1.90 billion in Q4 2018. Over the same period, equity release has grown by an average of 7.1% each quarter – more than doubling from £51 million in Q2 2016 to £1.08 billion in Q4 2018.
Commenting, Alistair McQueen, Head of Savings & Retirement at Aviva said:
“These equity release numbers are encouraging. If you thought the pension freedoms were popular, look at the growth of equity release.
“Property and pensions together represent nearly 80% of private wealth in the UK.3 As our life expectancy reaches record highs4 and our savings ratio hits record lows5 it is understandable that people are increasingly turning to their property wealth to fund their longer later lives.
Five steps for someone considering equity release
- Reframe your retirement expectations
The days of working one day and stopping the next are increasingly a thing of the past. As are the days of simply using our private pension wealth to purchase an annuity to fund our life in retirement. We’re adopting a much more flexible approach to retirement in terms of how we retire, when we retire, and how we fund our retirement. We should open our mind to this greater flexibility to ensure we are best placed to thrive, not just survive, in later life.
- Consider your full wealth
Our pension savings and our property will increasingly represent equal amounts of wealth as we approach retirement. And for many, property will be our biggest asset. With this greater diversity of wealth, we should increasingly consider all our assets as we plan our lives in retirement.
- Secure professional advice
If we want to use equity release we’ll be required to secure professional financial and legal advice to guide our way. This is important because taking out equity release will reduce the amount of inheritance you are able to leave. It may also affect your tax position and entitlement to welfare benefits. As we look at our wider retirement options, we’ll increasingly find value in securing professional advice for all our retirement planning. For many, this investment up front will reap rewards in the years that follow.
- Discuss your plans with your family
As a nation we don’t relish discussing our finances with others, including members of our family. If, however you plan to use equity release it’s wise to share these plans with your family. Your family may be assuming they’ll be able to use your property wealth to fund their lives. You may have different plans in mind. A common understanding today will help avoid confusion and upset tomorrow.
- Consider all your plans for your housing wealth
Some of us may see our home as a means of funding our retirement; some may see it as a means of paying for later life care; some may see it as a means of updating our existing home; some may see it as a source of providing inheritance; some may see it as a means of helping younger members of their family on to the housing ladder; and some may see it simply as a home. The demands on our home may be numerous. Consider all these potential demands before taking your next steps. You’ll need to ensure there is enough home to go around.
Notes to editors:
- For information on how Aviva is helping our people, customers and communities impacted by COVID-19 visit: www.aviva.com/covid-19-our-response/
- We exist to be with people when it really matters, throughout their lives – to help them make the most of life. We have been taking care of people for more than 320 years, in line with our purpose of being ‘with you today, for a better tomorrow’.
- In 2019, we paid £33.2 billion in claims and benefits on behalf of our 33.4 million customers.
- Aviva is invested in our people, our customers, our communities and our planet. We were the first international insurer to go operationally carbon neutral in 2006, we have invested £6bn in green assets since 2015 and we are a member of the UN Net Zero Asset Owner Alliance.
- Aviva is a Living Wage and Living Hours employer and provides market-leading benefits for our people, including flexible working, paid carers leave and equal parental leave. Find out more at www.aviva.com/social-purpose
- We will focus on the UK, Ireland and Canada where we have leading market positions and significant potential. We will invest for growth in these markets. Our international businesses in Europe and Asia will be managed for long-term shareholder value. We will also transform our performance and improve our efficiency. Our transformation will be underpinned by managing our balance sheet prudently, reducing debt and increasing our financial resilience.
- Total group assets under management at Aviva group are £522 billion (HY20) and our Solvency II capital surplus is £11.8 billion (Q320). Our shares are listed on the London Stock Exchange and we are a member of the FTSE 100 index.
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