According to recent government statistics, there are now 1.7 million widows over the age of 70 in the UK. That’s roughly triple the number of widowed men.
The harsh reality of this situation is that outliving their spouse could significantly impact a woman’s financial prospects in later life.
Not only is it entirely possible that their partner may have made the mistake of choosing a single rather than a joint life annuity but their workplace pension provision may well reduce or cease all together upon the death of the principal recipient.
This can be disastrous – especially if the surviving spouse had taken time out of the work place to raise a family with the idea that the husband’s pension provision would be shared.
Similar financial pressure is often felt by single women entering retirement, as well as those who experience divorce in later life.
Around 6,000 women over the age of 60 divorce each year in the UK. It is likely that many of the women who fall into these two groups will also need to fund later life with a more modest range of assets.
Couple these challenges with the fact that women are typically less able to save adequately for retirement than men, not to mention the financial impact of the Covid-19 crisis, and the problem only becomes greater. Indeed, more2life’s latest Later Life Lending research found that, when life expectancy is taken into account, the ‘gender pension gap’ could be as much as £108,130 for single women.
Equity release
As such, many in this demographic are turning to solutions like equity release to help boost their later life income, a fact which is clearly reflected in research from one of the UK’s leading later life advice providers, Key.
Its findings show that single women are twice as likely as single men to use equity release in later life. In fact, over the last 12 months, 26% of Key’s equity release customers were single women, compared to just 13% of single men.
Interestingly, more2life research revealed that 26% of women aged 54 and over said they own property wealth by themselves or with a loan, compared to just 19% of men.
So perhaps it is not surprising that more women are turning to property wealth to help them live more comfortably in their later years.
What do single women use equity release for?
Equity release customers can use their tax-free cash however they choose, so there is often a variety of reasons why people decide to unlock their property wealth.
Typically, it is driven by the need to repay debt, increase retirement income or gift to family with the residual amount being used to meet more aspirational needs such as holidays.
Single women are now more likely than other customers to use their unlocked housing equity to meet financial needs in retirement, rather than wants.
Many now choose to fund home improvements in order to make their property more suitable to their later life needs. Others gift money to loved ones in need of a financial boost.
Given the economic disruption caused by the crisis, many low-deposit buyers – such as those purchasing a property for the first time – are increasingly struggling to access 90% and 95% loan-to-value mortgages.
As a result, it has become popular among single women to take a portion of their property wealth and gift this as a cash lump sum to their younger relatives in order to help them onto the housing ladder.
The continuing role of equity release
While news regarding Britain’s rollout of the coronavirus vaccine has rallied stock markets and helped boost consumer confidence, the economic disruption caused by the pandemic is expected to last for a long time yet.
Considering the financial impact this will have on thousands of households across the UK, including older people, it will be vital that those in need of financial support can access innovative and flexible solutions.
In this sense, equity release will continue to be a useful way for people to improve their financial wellbeing and ensure they can live comfortably in later life.
Understanding the benefits of equity release will also be vital for single women entering retirement. Those who want to learn how to build or adapt a financial plan for later life should first consider speaking with an adviser.
Having a professional on-side to help navigate the task of financial planning is not only reassuring, but also an extremely helpful exercise for those who are keen to learn more about the full range of options available to them.
Products like equity release can be explored and considered well before customers actually retire, so advisers can often help customers understand how property, along with other assets, can work to generate income in later life as part of a wider financial plan.
As such, those wishing to strengthen their financial health in the lead-up to later life should engage the help of an adviser to help them.
Stuart Wilson is corporate marketing director of more2life
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Further reading…
You can read Stuart’s previous features in this series by clicking on the links below:
How housing wealth could close the retirement funding gap
Risk versus reward – how men and women approach debt in retirement
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