1 in 5 Brits to retire with just £2,500

One in five Brits now expect to retire with less than £2,500 in cash savings, according to new research – equivalent to the average monthly wage before tax.

Nationwide Savings research, which polled 2,000 adults of working age, was conducted to highlight the nation’s savings habits approaching ISA season. Despite a healthy attitude towards cash savings, though, one in five expect to have barely the amount for a family holiday or new boiler in cash.

Nonetheless, the average person anticipates having £42,244 stashed away in savings at retirement, excluding any pension pot. A further 12 per cent are planning to have more than £100,000 in savings when they finish work.

Nationwide figures show the average Cash ISA saver has £13,191 in their account, including previous years’ savings. While this is more promising, it still means that the majority of people are nowhere near maximising their annual allowance of £15,240, let alone the new enhanced limit of £20,000 when it comes into effect on 6th April.

The new ISA flexibility rules give savers the ability to withdraw and top up their ISA to the maximum allowance; previously, if a saver withdrew funds from their ISA, that part of their annual allowance was lost. The research shows that one in five savers who withdraw money from their ISA replace it again at the same level. The majority (38 per cent) of savers say they made the withdrawal as they needed to access the money in an emergency or were saving for a particular purchase (31 per cent), such as a deposit for a home, which they are now ready to make.

Tom Riley, Nationwide’s Head of Savings, says: “For some a regular savings habit is a way of life, but others need more of an impetus to put money aside on a regular basis. This could be the desire to fund a certain purchase, such as a deposit for a home or a wedding, but for others the kick-start could be having faced a previous situation where they needed money, but had none put aside.”


Retirement debt on the rise

17th February 2017

A quarter of those planning to retire this year expect to do so in debt, reveals new research. A report from Prduential shows that proportion of people retiring in debt this year is at its highest level for seven years, with people owing an average of £24,300.

The average amount owed has increased by nearly 30 per cent since last year – the equivalent of £5,500, and the first time Prudential has reported a growth in retiree debt since 2012 when the figure peaked at £38,200.

Those who are planning to retire with debts in 2017, and expect to clear them, will take nearly three and a half years on average to pay them off – and the repayments will cost them an average of £230 a month, up slightly on the £224 a month faced by last year’s retirees.

Mortgages have become a bigger source of debt for the Class of 2017 compared with previous years. Nearly four in 10 (38 per cent) of those expecting to retire this year with debt still owe money on property, up slightly from 33 per cent last year. However, credit cards remain the major debt issue with 51 per cent of those with debt still owing money on plastic at retirement.

Vince Smith-Hughes, a retirement income expert at Prudential, says: “For most people the move from work into retirement will see them having to cope with a drop in their income. So having to use precious retirement income to pay off debts could make life even more tricky for the newly retired.”

“People looking for free information on how to pay down as much debt as possible, preferably before the time comes to give up work, can contact Citizens Advice. The Government’s Pension Wise guidance service can also be a good starting point for people preparing to give up work and thinking about taking an income from their pension savings,” adds Smith-Hughes.


Equity release hits record high in “landmark year”

16th January 2017

Equity release lending surged to an all-time high in 2016, in what the industry has hailed as a landmark year.

According to KeyRetirement.com, retired homeowners withdrew more than £2.1 billion of property wealth last year, marking the sector’s fifth year of growth and a new all-time high.

“2016 has proven to be a historic year for the equity release sector,” comments Nigel Waterson, chairman of the Equity Release Council. “Passing the £2 billion mark for the first time indicates that housing wealth is becoming an increasingly important focus of retirement planning.”

Indeed, homes paid out more than £5.8 million a day last year to pensioners, according to KeyRetirement.com, with the average retired homeowner accessing nearly £78,000 from their property to boost their standard of living.

The total value of property wealth released in 2016 grew 26 per cent on the previous year, taking it to more than double its size in 2011, Key’s 2016 Equity Release Market Monitor shows.

The number of homeowners using property wealth to enhance their retirement finances also rose by 17 per cent to around 27,666 compared with 23,747 in 2015.

The over-55s finance specialist’s research shows around two-thirds of customers are using some or all of the cash released for home and garden improvements. Around a third are spending some of their property wealth on clearing loans or credit card debts, narrowly ahead of the 29 per cent who use the money to fund holidays and the 24 per cent who are helping out family.

Mortgage repayment, which is expected to increase throughout 2017 and beyond, due to the pressures of interest only maturities, accounted for 22 per cent of customers’ use for funds released.

“With more than 1 in 5 releasing equity from their homes are repaying mortgages and with 2017 being the start of the first major wave of interest only mortgage maturities we expect demand from those with a shortfall to repay the capital, or no means at all, to turn to equity release as a solution which will further drive demand,” says Dean Mirfin, technical director at Key Retirement. “Rate cuts across the market and the launch of new solutions demonstrates that the market is responding to the growing need for alternatives to traditional retirement income solutions which are being squeezed by historically low interest rates.”

Across the country seven out of 12 regions saw growth in the value of property wealth released with East Anglia recording the biggest increase at 67 per cent, followed by a 43 per cent rise in London, while the South East saw growth of 35% and Wales growth of 32 per cent. The biggest fall in property wealth being released was 29 per cent in Northern Ireland while the North West and Yorkshire & Humberside were only slightly lower.

More than half the value of property wealth released was in London and the South East, where around 10,500 homeowners shared £1.1 billion.

“It is vital that we now build on this momentum to ensure more people can access the necessary information and advice to make informed choices about how best to use their various assets in later life,” adds Waterson.