Britain’s pensioners could be foregoing much-needed cash in retirement because of fears about equity release, research from Aviva suggests.
Despite more than a third (39 per cent) of Britain’s over-55 homeowners recognising the potential benefits of using their properties to release money, many remain reluctant to tap into such schemes, the life insurance company says.
The changes announced in this year’s Budget mean people will have even more freedom in how they take their retirement savings.
Aviva says this could increase the risk of people running out of money if they do not plan thoroughly and consider all of their assets.
The company’s online poll of 1,200 homeowners found that while the over-55s feel they have a strong overall understanding of equity release (82 per cent), many remain confused by how the products work.
One in ten over-55s say it is something to do with releasing money from a home but they do not know how.
More than a quarter (27 per cent) say equity release involves selling their home and becoming a tenant in it until they die, which refers to an older version of the product that accounts for only about 1 per cent of plans currently sold across the market.
This may explain why 21 per cent of those who have no plans to take out equity release say they fear losing their homes.
And almost half (46 per cent) of these say they will not dip into the value in their homes because they want to pass on their properties in full as inheritance.
How has equity release changed?
Today, most equity release products are sold as lifetime mortgages that allow customers to take out a loan against their property, and do not affect ownership.
Providers like Aviva may also allow people to ring-fence some of their property value so that they can pass it on as inheritance.
Only 15 per cent of over-55s say they would consider equity release as a way of funding their retirement, with 4 per cent saying they have already taken out the product.
However the older someone gets the more likely they are to consider equity release, with 16 per cent of over-65s saying they would consider it compared to just 12 per cent of 55-64s.
This is consistent with the average age an Aviva customer takes out equity release, which stands at 70 years.
