July 19, 2024

The Great Unretirement: Has the Spring Budget increased UK pensioner poverty?

Latest research finds a growing number of retirees already living on the poverty line amidst the UK’s cost-of-living crisis   

  • 18% say their quality of life is going to deteriorate because they don’t have enough money in their pension funds
  • 21% have paid off their mortgage but admit their pension payments still don’t allow them to live a fulfilling life
  • 15% say their biggest mental health strain is worrying about funding their retirement

A report from Senior Capital – the UK’s leading later life lending specialist – has revealed that amidst the UK’s cost-of-living crisis, almost one in five pensioners (18%) across the UK will be on the poverty line due to not having enough money in their pension funds. This coincides with a further 600,000 Brits falling into absolute poverty, with the UK’s overall figure reaching 12 million. Britain’s recessionary climate has also forced 32% of the nation to halt personal contributions to their pension pot, with the number of people being affected by the crisis at nearly 16m, making up nearly a fifth of the population according to The Health Foundation. In light of these findings, Rudy Khaitan, Managing Partner of Senior Capital, highlights how equity release loans allow pensioners to remain in their homes whilst also accessing their capital value to help fund their retirement.

Due to the increase 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, however, are unable to access this in order to fund their retirement in the present. In the early 70s, the average house price stood at a mere £4,975, but according to the latest figures released by the Office for National Statistics (ONS) in July, the average house price has skyrocketed to £290,000. By engaging in equity release, those who are currently struggling have the opportunity to tap into the significant value tied up in their homes, whilst also remaining in them and accessing much-needed funds to alleviate their financial strains amidst the ongoing cost of living challenges.

Reporting on 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 highlights that many of Britain’s retirees are 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. Senior Capital’s further data shows that 21% of respondents said that despite paying of their mortgage in full, they were still unable to live fulfilling lives due to not having enough money in their retirement funds.

Amidst this new wave of pensioners who find themselves living on the poverty line, equity release loans have experienced a record 23% year-on-year increase as a vital lifeline amidst the cost-of-living crisis. According to the Equity Release Council, over 93,000 Brits took out this type of plan/loan in 2022. With the purpose of creating financial liquidity, stability and bettering quality of life, Senior Capital was created to serve a growing number of homeowners looking to access capital from the £800bn currently tied up in property wealth.

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.”

About Senior Capital:Established in August 2022, Senior Capital has mobilised in excess of $150m for the UK economy via an origination and securitisation platform which simultaneously unlocks wealth for the UK’s retiree generation and allows for the easier transmission of wealth towards younger generations. With a vast majority of millennials unable to access the housing ladder – and a 40% standard Inheritance Tax rate – Britain’s wealth is currently held within the remits of those who are now desperate to release this capital – with 1-in-5 of those aged 65+ classified as millionaires, according to asset manager Netwealth. With the typical homeowner now having five years’ worth of retirement income tied up in their property, there is a dire need for new lending structures that can transform this into cash to help both pensioners in need and the economy.

  • In April 2023, Senior capital closed its second round in a series of securitisations of equity release through mortgage assets
  • This success allowed Senior Capital to secure permanent funding in excess of $150m from UK and US re(insurers) in the form of structured, externally rated notes
  • On close, Senior Capital was able to realise a positive liquidity event, with the proceeds from the sale of these rated notes being in excess of the total acquisition cost of the underlying assets