Very often, anyone living on a pension will need to prove to mortgage providers that they have a steady income to meet any mortgage repayments, which can be difficult to prove if you’re over 65. Many people are overcoming this hurdle by taking out a lifetime mortgage, a type of equity release secured against your home that only needs to be repaid once you die or move permanently into long-term care.
According to a new study by Bower Home Finance, many people need help saving enough money for retirement. The study suggests that the retirement pension pot is becoming increasingly unattainable for many individuals.
This is due to a combination of factors, including the rising cost of living, stagnant wages and a lack of financial education. The study found that many people need to save more for retirement and may have to rely on their state pension, which is often insufficient to cover living expenses.
How Much Do You Need To Comfortably Retire In the UK?
Experts at Bower Home Finance reveal that you will need £33,700.20 per year for a comfortable retirement in the UK, using the 50-70% rule.
- The median salary in the UK currently stands at £33,000.
- £415,800 – pension pot needed for a comfortable retirement in the East, which equates to £23,100.
- Including the state pension contribution, the yearly income would be £33,700.20 – assuming you qualify, following the increase to £203.85 from £185.15 that pensioners receive from the government, and based on a retirement of 67-85.
- London ranked as the highest annual income needed to comfortably retire, with the North East being the lowest.
- Scotland ranked third in annual income needed for a comfortable retirement across the UK.
- 57% of people aged 16 to state pension age contribute to private pension plans.
What Steps Can You Take To Have A Comfortable Retirement?
Given that people live longer, healthier lives, it is crucial to maximising retirement savings. Bower Home Finance lists several strategies to do this:
Start as soon as possible as a retirement pot will have longer to grow the earlier saving starts. Eliminate debt where possible; establishing a plan is essential for retirement planning. If there have been multiple jobs, look up any likely previous pensions, there may be previous pensions attached to past work history.
Furthermore, it may be possible that there are forgotten bank accounts to make sure all allowable benefits are claimed finally.
Based on the average yearly salary in the UK, £33,700.20 will allow for a comfortable retirement, which is a worry for many in the current economic climate.
However, amassing the required amount in a pension pot to give this level of income has yet to be possible for a large number of people and for those who need to consider other options to help with later life finances, a lifetime mortgage is something to be considered. Comprehensive, independent and qualified advice must consider all pros and cons.
Andrea Rozario – Chief Corporate Officer, Bower Home Finance:
‘For many, saving for retirement has either not been possible or an attitude of “My house is my pension” has been adopted. We all now know that we are living longer and, hopefully, healthier lives and enjoying retirement after years of working hard is something many look forward to, which is why planning is essential.
Unfortunately, the current cost of living crisis has hit many hard across the generations. Families need help to keep up with rising prices and massive hikes in mortgage payments. For a particular cohort aged 55 and over, a lifetime mortgage could help ease this burden dramatically whilst offering flexibility and options to make their retirement one they have dreamt of.
It is the baby boomers in particular that have benefited from highly high house price inflation, and with billions tied up in property wealth, it’s clear this will be an increasing source of funding for retirement along with myriad reasons, including helping younger members get on to the property ladder and mitigating IHT. For these reasons, the later life lending market will continue to grow for the foreseeable future.’
Who Is Bower Home Finance?
Established in 2006, Bower Home Finance has grown considerably to be one of the country’s most trusted providers of home finance and equity release advice, with independent expert advisers across the whole of the UK.
Held in high regard by the public and industry peers, Bower is a multiple award-winning company and a Platinum Trusted Service Award winner with FEEFO, the independent.
Bowers ethos of Trust, Honesty and Service is at the core of all customer service, ensuring customers feel in control of their decisions and have ultimate confidence in their choices. Explaining all the options and the pros and cons to a customer is part of the process, and the role of the adviser is to ensure the best possible outcome for every client.
Bower is a proud member of the Equity Release Council and adheres to and promotes the standards of the Council. Geoff Charles, Bowers CEO, is a current Council’s Standards Board member.