"Equity release is being used more and more frequently as a financial planning tool and a springboard to achieving retirement ambitions and offering family members support."
To get an insight into these differing motivations for using equity release, we asked over 500 people, who had either taken out equity release or seriously considered it, what motivated them and whether they considered any other options before deciding on equity release.
Motivations for equity release
It is true that historically equity release has had somewhat of a stigma attached to it. However, today, equity release is being used more and more frequently as a financial planning tool and a springboard to achieving retirement ambitions and offering family members support.
By a long way, our research found the most common reason why individuals choose to take out equity release – cited by a third (32%) of customers – was because they wanted more from life as they got older and needed additional money to realise this. Far from financing exotic trips, examples such as enjoying a meal out more often or being able to take the family away for the weekend were often cited.
Second to this, our customers said equity release had been used for preparation purposes in retirement. Nearly a fifth (17%) of customers had always known their pension and existing savings were not going to be enough to cover their needs, so they chose to take out equity release to set themselves up for retirement – far from the last resort decision it has historically been painted as.
In fact, less than one in ten customers took out equity release in response to a life changing event – such as a divorce, redundancy or illness – that might have derailed their financial plans. What this tells us is that people taking out equity release are, more often than not, using it as a proactive financial planning tool.
Alternate options
However, our research also shows that many of our customers considered other options before choosing equity release as a solution. For example, when individuals realised they were in need of additional funds to achieve their financial goals, four in ten felt thoughtful about their finances and took the time to consider what options were available to them.
Others explored the possibility of downsizing their homes, dipping into their savings, or taking out a personal loan before turning to equity release. Of these, it was downsizing that proved to be the most popular second choice, with a quarter (25%) of customers considering this option.
This clearly highlights that people are taking their time to consider all the options available to them in order to make the right decision based on their individual circumstances. By speaking to a specialist adviser, they can explore this further and ensure they make sensible and sustainable choices in their later life that will provide them with a solution that suits their needs.
A good financial adviser will make their customer aware of all of the options and help them understand what role their largest asset – often their property – could play in their retirement. Having a consultation with a qualified financial adviser adds another layer of consideration to the process and ensures proper assessments have been made.
Our research shows this layer of support is well appreciated and valued by customers, too. Six in ten (61%) felt relieved after their consultation as it gave them a clearer idea of what their options were, while 58% said they felt optimistic for the same reason.
Our Lightbulb Moments research has helped dispel the myth that equity release is a product of last resort, and it has in fact demonstrated that it is a far more nuanced option for over 55s and something that is used and considered for a variety of reasons.
Regardless of how people intend to make use of the additional funds made available to them through equity release, whether that be to augment their retirement income or to support friends and family, the most important thing to ensure is that they have weighed up all of their options, determined what is right for them, all with the professional support of an adviser.
