Comment

Equity release and pension freedoms reach new highs in the UK

Image of a doctor with a stethoscope and arms folded

Today sees the release of the latest Equity Release Council(1) and HMRC Pension Freedom(2) figures. Both report a record 12 months.

Equity Release: £3.95 billion of housing wealth was unlocked via equity release between July 2018 and June 2019. This is up £450 million (12%) on the previous twelve months, despite some slowdown in H1 2019. In Q2 2019 alone, £911 million was unlocked via equity release. This exceeds the total amount that was being unlocked over four quarters just a decade ago.

Image of a doctor with a stethoscope and arms folded

It is notable that the use of drawdown mortgages now dominates the equity release market, representing more than two-thirds (67%) of new plans taken out in Q2 2019. Flexible use of equity release is growing fastest.

Pension Freedoms: £8.7 billion has been withdrawn from pensions via the pension flexibilities between July 2018 and June 2019. This is up £1.6 billion (23%) on the previous twelve months. Q2 2019 alone was an all time high, with £2.75 billion being withdrawn via the pension flexibilities.

As with equity release, thousands are seeking flexible use of their pensions. The average amount withdrawn per individual continues to trend downwards, to an average of £8,184 in the latest figures. This eases the concern that the pension freedoms would drive a “dash for cash”.

Commenting, Alistair McQueen, Head of Savings & Retirement at Aviva said:

“Today’s figures show that people are turning to all their assets – property and pensions – to fund their later lives, like never before. And we have a record number of people saving for their retirement too, via automatic enrolment(3).

“The next ten years will see nine million people reach the age of 55 – the age at which we are typically eligible for equity release and the pension freedoms. Nine million is more than we have ever seen before(4).

“The desire of the nine million to flexibly blend their assets at retirement – property and pensions – looks set to keep growing.”

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Sources contain public sector information licensed under the Open Government Licence v3.0.

1.        www.equityreleasecouncil.com/news/two-speed-equity-release-market-emerges-in-q2/

2.       www.gov.uk/government/statistics/flexible-payments-from-pensions

3.        www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/articl-es/pensionparticipationatrecordhi-ghbutcontributionsclusteratminimumlevels/2018-05-04

4.        www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populatione-stimates/bulletins/annualmidye-arpopulationestimates/mid2018

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Fiona Whytock

Retirement, Savings & Investments

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