New research suggests that, comparatively-speaking, younger people are far more reliant on property and house equity to fund retirement than other generations. According to survey research by insurance company Canada Life, 9% of those aged 16 to 54 expect housing equity to be the major source of saving for retirement.
Those aged over 55, however, are less likely to rely on house equity as a form of retirement planning, with only 3% expecting the method to be a source of retirement savings. Why, then, is there a 6% gap between older and younger generations in terms of their attitude to retirement, and what does this say about the state of property finance at large?
Why the Retirement Gap?
The reason, unsurprisingly, comes down to pensions. Younger people are less likely to receive pensions on the same scale as those over 55. This is supported by previous research by the UK branch of Canada Life which suggests younger people have pretty much given up on the possibility of receiving a decent state pension upon retirement.
According to that state pension research, 14% of young people believe the state pension won’t exist by the time they retire, increasing to 20% in the 18 to 24-year-old age group.
The important point of this older research is the admittance by the 18 to 24-year-old group that they, on average, believe a state pension will only make up 27% of their retirement income, whereas older age groups believed it would make up 42%.
To bridge this gap, younger people are investing in property as they believe it to be a safer, more futureproof option. Overall, the trend alludes to a wider disillusionment and trust with the government than previous generations.
What Does This Say About the Health of Property Management?
Recently, the rate of equity release has increased. The Equity Release Council stated that the first quarter of 2019 released £1.18 billion compared to £1.03 billion in the same period of 2018. At face value, equity release is increasing meaning that property finance, in terms of retirement savings, is becoming a more attractive option for retirement.
However, the way people are spending their equity release does not correlate with retirement planning. Data suggests that the majority of those who take out equity funds – roughly 60% in fact – would spend the money on home or garden improvements, with 35% stating they would use the money to pay off credit debt. Other non-retirement spending opportunities had a high percentage too, with 31% stating they would use equity release to pay for holidays.
Only 28% would use the equity release to pay off mortgage debt. So, while young people appear to want to use equity to fund retirement, current equity release is being used for spending on improvements and holidays. Though, with so many younger people believing in equity release, spending habits will likely shift over time.
Are You Banking on Equity?
If you’re thinking about saving for retirement and building up your equity, then we can help. Just give our experienced residential mortgage brokers a call.
As always, think carefully before securing debt against your property.