In an era of high inflation does it make sense to save cash? It’s a tough question and the correct answer in financial terms is no, it does not. The value of any money set aside for the future will lose its spending power as time goes by. But the upside of saving is that you have something to provide funds for emergency situations that inevitably happen in everyone’s lifetime.
Here’s the word from The Resolution Foundation, who have found that over 11 million working-age Britons lack basic savings, with less than £1,000 set aside for emergencies. This is a huge opportunity for insurers, if they can develop inflation tracker savings plans, which have an injury cover element built in. So you save long term, you get a lump sum if you cannot work for more than 6 weeks and it accrues interest that keeps pace with the official inflation rate. If you build that product people will save something, rather than nothing.
Pensions are another matter and frankly it is impossible for a person on average earnings to set aside enough cash into any private scheme that matches a public sector pension. However a change in the law that allowed private pensioners a FULL State pension, without losing part of it due to receipt of a private pension, would be a major incentive for people to start a scheme at a young age. For those who own property in prime locations, their property is their lump sum – access some cash and live a little seems a better option to many, rather than selling up and moving to a cheaper location where crime, vandalism and poor NHS serives are the norm.
The Resolution report estimates a £74 billion shortfall in emergency and retirement savings compared to an ideal scenario where every family has at least three months’ income saved. In light of this, Senior Capital – the UK’s leading later life lending specialist – has revealed that amidst the cost of living crisis, almost one in five pensioners (18%) across the UK will find themselves on the poverty line due to not having enough money in their pension funds.Highlighting the extent of this issue, a staggering 13% of over-65s say they have even had to delay their retirement due to having insufficient funds in their pension pot. However, this comes as further research from Savills has revealed that UK pensioners now hold a record £2.6 trillion in housing wealth, making them the most financially crippled yet asset-rich generation in recent history.
In light of these alarming findings, Rudy Khaitan, Managing Partner of Senior Capital, highlights how equity release loans are soaring in popularity as they allow pensioners to remain in their homes whilst also accessing their capital value to help fund their retirement. Due to the surge in house prices over the last 50 years, thousands of pensioners now find themselves in a situation of having a significant amount of capital wealth but feel they are unable to access this to fund their retirement in the present.
Bringing attention to the dire need for methods of accessing capital such as this, further findings from the report have revealed that one in seven pensioners now say that their biggest mental health strain is worrying about funding their retirement. Subsequent research from Age UK highlights why so many of Britain’s retirees are so concerned amidst the cost-of-living crisis, with 22% already reducing or stopping spending on medications and 15% skipping meals due to their financial situation. Even for those who are more fortunate, Senior Capital’s data shows that 21% of respondents said that despite paying off their mortgage in full, they were still unable to live fulfilling lives due to not having enough money in their retirement funds.As traditional routes of unlocking capital become increasingly restricted amidst a lending environment that is stacked against an ageing nation, later-life lending specialist Senior Capital is the first equity release provider to overhaul the financial limitations to life after 60. By creating a new model of equity release that enables a higher percentage of pensioners to release the cash stuck in their homes, the firm is on course to release millions into the UK economy through higher LTVs and more flexible repayment structures, unique to Britain’s pensionable population. Managing Partner of Senior Capital, Rudy Khaitan, comments on releasing equity and the importance of LTV:“There is a growing need for new products that offer greater flexibility and choice, particularly in the relatively underserved later-life lending market. For pensioners or anyone planning for their retirement, LTV is a critical component when assessing your quality of life during your later years, so it’s vital to investigate a multitude of options that can help ease your financial obligations, as remortgaging may not always be the right option.“The right equity release mortgage product, particularly those that offer the greatest flexibility through limited prepayment penalties, can be the better option vs a more traditional mortgage when you want to unlock the value in your home without taking on additional monthly repayments. It allows homeowners to access the equity built up in their property, providing a tax-free lump sum to supplement regular income, whilst still retaining ownership and the right to live in their home for life or until they move into long-term care. This can be particularly advantageous for those who are retired or have limited income, as it offers financial flexibility and stability without the burden of servicing higher mortgage repayments.”
Be the first to comment