ERC research shows retirement confidence falling sharply

Nearly half of people, 46%, do not feel confident about their future finances, up from 35% in 2021, according to research published on 16 February 2024 by the Equity Release Council (ERC), a body that represents equity release providers¹. The survey covered 5,000 people¹.

Among UK adults, 57% said their financial situation had got worse over the past year, while 14% said their finances had improved¹. Confidence fell across age groups. Pre-retirees were the least confident, with 55% of those aged 45 to 54 reporting they were not confident about the future¹. Among adults aged 55 to 64, the share lacking confidence rose from 37% to 51%¹. Retirees aged 65 to 74 showed the largest fall: 18% lacked confidence in 2021, rising to 39%¹.

The ERC survey followed analysis by the Pensions and Lifetime Savings Association (PLSA) on the income needed for retirement. The PLSA's retirement living standard for a moderate standard of living for a single person rose by £8,000 over the past year, from £23,300 to £31,300, while those with a comfortable standard of living now spend £43,100 a year¹. More than one in three homeowners, 37%, said they had struggled to build up enough pension savings to be confident about their living standards in retirement, according to the ERC research¹.

Jim Boyd, chief executive officer at the Equity Release Council, said of the findings:

The ERC research was reported alongside an explanation of how equity release works. A lifetime mortgage, the most popular form of equity release, is a loan against a property repaid from the proceeds when it is sold¹. Borrowers must be at least 55, and the older the borrower the more they can borrow, with a maximum of around 60%¹. No monthly repayments are required, which the report said can make lifetime mortgages expensive because interest rolls up¹. Borrowers can take a lump sum, with interest charged on the whole amount at a fixed rate, or draw chunks of cash as needed, paying interest only on the money taken¹.

Products from Equity Release Council members must meet set standards, including a rate fixed for each release or capped for the life of the loan if variable, the right to remain in the property for life or until long-term care is needed, the right to move to another property subject to lender approval, a no negative equity guarantee, and the right to make penalty-free payments subject to lending criteria¹. Repaying a loan early often triggers an early repayment charge¹. Equity release can affect means-tested benefits such as Pension Credit and reduced council tax, and usually reduces the size of an estate¹.

Why it matters for households

The fall in confidence is concentrated among people approaching retirement and the newly retired. For those aged 55 to 64, the share lacking confidence rose by 14 percentage points between 2021 and the survey, and for those aged 65 to 74 it rose by 21 points¹. The PLSA figures put the income needed for a moderate single retirement at £31,300 a year, £8,000 more than a year earlier¹.

For homeowners with property wealth but limited pension savings, equity release is one route reported as a way to generate income in retirement¹. The trade-offs are dated facts of the product rather than reasons to act: interest compounds where no repayments are made, the estate available to leave to others is typically reduced, means-tested benefits can be affected, and early repayment can carry a charge¹. Anyone considering it is required to take professional advice, and advisers must be authorised by the Financial Conduct Authority¹. The ERC standards listed above apply to new plans from member firms¹.

What happens next

No further steps, dates or responses have been reported beyond the 16 February 2024 publication of the ERC findings and the PLSA retirement living standards cited alongside them¹.