It’s hard to think of a single thing that has remained unaffected by this pandemic. Well, maybe the Tories’ polling numbers, but that’s another story.
Unfortunately, the lingering impact of the Covid-19 pandemic has hit the wallets and the hearts of millions around the globe. Although the end may well be in sight, the damage for many people, especially the over 50s, has already been done.
According to a new survey from Scottish Widows, more than half of over 50s fear they will run out of money in retirement because of the impact the pandemic has had on their finances. It is gut-wrenching to know that so many people, millions up and down the country, in fact, will have had their retirement plans upended by the pandemic.
Pensioners, as we call them, once relied on their pension pots to fund their life after work – hence the name. But how many today can say that they will rely solely on their pensions in retirement? Not that many.
In truth, calling retirees ‘pensioners’ is becoming less and less factual by the day.
Even before retirement begins, many people are dipping into their pots to keep their head above water during the pandemic. Again, Scottish Widows shines a light on the reality as they say some 383,000 over 55s withdrew money from their pension in Q1 of this year, a sharp 10% spike upwards.
Looking wider than that, over a third (37%) of all people in their 50s claim that coronavirus has directly damaged their finances, the most of any age group.
Ultimately, today’s retirees are going to have to have a diverse and varied approach to later life financial planning. The slow death of reliance on pensions is gathering pace, catalysed by the long shadow of the pandemic.
So, those heading toward retirement need a new plan. A plan that can help them survive a retirement that will be, on average at least, far longer than their parents and grandparents. Fortunately, there is an option that could help.
While pension pots have been plundered and savings dipped into, property has remained incredibly buoyant. In fact, in the face of every prediction and doomsayer, house prices have climbed to record highs throughout the pandemic.
Rishi’s extended stamp duty holiday has certainly helped support the property market, but the rush of city workers who have enjoyed the flexibility of working from home and no longer need to commute will certainly have helped keep the market active as well.
Indeed, property website Rightmove claims that June 2021 was the busiest month on record for property sales. This solidity has been astounding, but the impact is much deeper than people just escaping to the country.
Property will become a cornerstone of later life financial planning, with pension pots often insufficient and retirees’ finances battered by the pandemic, options are being limited.
Houses will become integral to most people’s retirement plans. Perhaps downsizing will become more prevalent than ever before, and there is a lot to be said for selling up and moving to a smaller, more manageable property in later life. I imagine many thousands of those who left small one beds in central London to move into much larger properties in the countryside will be doing the reverse in later life, cashing in again and jumping back into a smaller property. But will this be for everyone? I doubt it.
For those who need financial help in later life but cannot simply downsize – be it for family care reasons, health issues, cost of moving or simply that they, like most of us, don’t wish to go through the stress of moving in old age – there are still alternatives.
Equity release could be ideally placed to be one such alternative. House prices are flying, as we have seen, and with a number of other retirement funding vehicles stuck in reverse, the allure of using a product like a lifetime mortgage is sure to grow.
For our side of the wider mortgage market, preparedness is key. We are not out of the woods yet when it comes to Covid-19, but the lingering effects of the pandemic will be driving many more people towards considering using their equity to support their retirement. And we – advisers, providers and everyone involved with equity release – must be ready.
Ultimately, although not ideal for everyone, equity release could be the silver bullet many retirees need to have the life they expected and deserve. Retirement has changed and, with the ongoing pandemic, will likely change again, so choices and knowledge is what every potential customer needs. Let’s give it to them.
Andrea Rozario is chief corporate officer at Bower