Years of stagnant interest rates, catastrophic drops in annuity rates and rising inflation have had a devastating impact on the cost of living for those relying on pensions, savings or fixed retirement incomes.
Research conducted by Saga Personal Finance has revealed that over a quarter of people are finding the lifestyle they dreamed of in retirement may no longer be affordable. As a result, enjoyment of their retirement is at risk, with socialising in particular cut down in order to preserve an inheritance for their children.
One in three people had not forward planned their finances.
Investigating the mismatch between retirement expectations and reality revealed that 40% admitted their pension pot was not as big as they expected, one in three had not forward planned their finances, whilst a third stated they are concerned about leaving an inheritance to their children.
One in five adults believe that their children are dependent on their future inheritance.
Almost one in five adults believe that their children are dependent on their future inheritance and 53% would feel guilty if they didn’t leave an inheritance. Unexpected costs affecting 28% of people have also been highlighted as a risk to enjoying retirement, with one in six claiming that they simply had not considered their retirement finances.
Asset rich, cash poor?
It's simply not the case anymore that older homeowners are all ‘rich’. Whilst some individuals may be asset rich, the reality is that for some cash flow is more of an issue.
One in six people in their sixties are paying off car finance or other loans
Debt in retirement is becoming more common, with one in fourteen people in their 60s and above still paying off a mortgage and one in six paying off car finance or another kind of loan for either themselves or their children. Typically, those who still have outstanding debt in their 60s are spending 18% of their monthly income on paying it off.
However, many of those over 60 who are asset rich, could tap into the wealth tied up in their property to help them achieve their desired lifestyle, or support their family financially.
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A new kind of equity release
Historically, the only option with equity release was to take a lump sum and/or a series of ad hoc lump sums, then put the money into a savings account to draw regular payments. However, for many this option simply didn’t make sense.
These monthly payments allow customers to keep doing the things that matter to them the most.
Following extensive feedback from customers, Saga has launched a revolutionary lifetime mortgage product to help combat the squeeze on income, enabling people to take a regular tax-free payment from their property. These monthly payments allow customers to keep doing the things that matter to them the most – whether that is paying the bills, maintaining their lifestyle, family days out or financially supporting their family.
More control over your money
The Saga Regular Drawdown Lifetime Mortgage is the first of its kind on the market and allows people to set how much money they would like to receive each month, with a minimum of £200. Withdrawing funds in this way gives people more control over their money and the choice of increasing or decreasing payments each year to suit their needs, as well as paying less interest over time than if they chose alternative lump sum or drawdown products.
Alex Edmans, Head of Product, Saga Personal Finance
Alex Edmans, Head of Product, Saga Personal Finance commented: “The economic situation over the past decade has left many people on a fixed income feeling the squeeze. Our research has shown that people are increasingly viewing their property as an asset which rightly forms part of their retirement planning.
“Our customers have consistently told us that they want a solution that enables them to stay in the home they love, but to use it as a way of generating additional monthly money. For many that means they can pay their bills or financially support their children, whilst others can go out and socialise with friends a little more often or treat themselves occasionally.
“However, we believe that there needs to be more innovation in the industry to help people make the most of the equity in their homes but in a way that works for them. We are delighted to be challenging the market with the launch of our new regular drawdown lifetime mortgage, which enables homeowners to use the equity in their homes to really make a difference to their lives."
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Full financial review
As with all of Saga’s lifetime mortgage products, people will have a free, full financial review of their personal circumstances with a qualified adviser, before choosing equity release.
“It is important that homeowners explore all of their options, so we offer a free full financial review to ensure that they do just that," says Alex. "We also encourage them to get family members involved in the decision where appropriate, to ensure that everyone is happy with it."
The Saga Regular Drawdown Lifetime Mortgage has a no negative equity guarantee.
"I’m pleased to say in many cases our review service has helped past customers to find other options that might better suit them, however for those who would like to pursue equity release, they can do so with confidence,” Alex adds. As well as the financial review, the product also has a no negative equity guarantee.
The lowdown on the Saga Regular Drawdown Lifetime Mortgage
• The Saga Regular Drawdown Lifetime Mortgage is available to people aged 60-80 with a UK property worth at least £150,000.
• People must take an initial tax-free lump sum of £10,000.
• People can take out a minimum monthly payment of £200.
• No fees for advice, valuation or set up.
• Interest on upcoming payouts reviewed each yea.r
• Ability to change monthly payment and release a further lump sum annually.
• Monthly payouts available for a minimum of 5 years and a maximum of 18 years depending on age.
• No negative equity guaranteed.