Legal & General has confirmed what most homeowners already know, your house is far more valuable than almost any private pension scheme’s one-off payment. Pensions that a normal wage-earning person can afford, not deluxe public sector of course. As house values continue to soar, the possibility of unlocking a lump sum from your house – or cashing out from a second rental property – looks increasingly attractive. Here’s the press release;
Homeowners in 53% of areas in England and Wales could access more than the average pension pot (£61,930) by using equity release, according to analysis by Legal & General Home Finance (LGHF) of median local house price data from the Office for National Statistics (ONS).
The most recently available ONS data outlining median house prices in England and Wales saw an average increase of 7.5% between March 2020 and March 2021 and of 24% between March 2016 and March 2021. Throughout 2021, house prices have increased even further. Legal & General customers accessed, on average, 24.5% of the value of their home through equity release, putting the expected amount that can be accessed across England and Wales at £72,988. Due to the impact of the property boom, the average homeowner could access £5k more in 2021 than in 2020 and £14k more than five years earlier.
Ongoing house price growth has led many homeowners to consider the role their property might play in their long-term financial planning. One in seven pre-retired over 50s (16%) plan to use their property wealth to boost their finances via products like lifetime mortgages, a type of equity release, or via downsizing. However, an additional 13% said a significant increase in the value of their property could also convince them to do so.
While in previous years the highest increases were in high value areas of London, properties in Buckinghamshire Hertfordshire and Surrey were those that saw the most significant growth between 2020 and 2021.
The mood music is changing in the buy-to-let market and more rights for tenants, plus the extra layers of climate change taxation, hydrogen boilers, insulation to Band A-C etc will all conspire to deter would-be landlords. However, no private pension can compete with a buy-to-let mortgage which the tenants are paying – assuming they pay the rent of course. You get the lump sum cash payout after 20-25 years and you aren’t laying out £300-£500 a month in premiums, the tenants are.
There is an opportunity for insurers to re-think pension schemes from the ground up, as governments become much more socialist, globalist, in tone, and actions. If the State is happy to allow millions of people to be supplicants for life, and guarantee they have a place to live in a social housing scheme even if they choose to reject work for their entire lives, then many people will question why they should bother with ANY sort of private pension.
Maybe another way of investing regular sums of cash, in greewashed projects, Crowdfunding woke companies, or even crypto, may well be a better fit for anyone under 35? There has to be a way of persuading younger consumers who DO actually work, and are already required by law to contribute to a Stakeholder pension, to set aside some money for themselves and their later years. The marketing magic wand has to somehow transform that message into something appealing, attainable and far cooler than the word `pension.’