Press Release
Date: 24 November 2016
TISA calls for Government and Financial Services Industry to help consumers get
real about ‘gambling on the house’ for retirement
TISA provides recommendations to help consumers plan for retirement as Government
announces review of ‘triple lock’ in 2020
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Two thirds of those retiring by 2030 are facing different degrees of under-saving
The people most likely to face shortfalls in retirement income only have wealth in their
home to fall back on
The research shows a lack of holistic advice and guidance that does not take home
ownership into account
‘Blind luck appears to be the planning mechanism being adopted by most people today.’
At its Annual Conference today, TISA, the financial services membership association, published a
report, ‘Can housing wealth save the day?’ that sets out the scale of under-saving for retirement in
the UK and the role that housing wealth might play in boosting retirement incomes. The report
includes new consumer research commissioned from The Wisdom Council and a sponsored review
of automatic enrolment and pension saving undertaken by the Institute for Fiscal Studies, (IFS). The
report sets out key actions that consumers, Government and the financial services industry need to
take to address this critical issue.
The report sets out the scale of under-saving to provide an adequate income in retirement and
surveyed over 1,000 UK homeowners aged 50 and over, to determine what part Housing / Property
plays in their savings portfolio, and how they might use the equity in their home to boost their
retirement income.
The consumers surveyed had optimistic goals about their lives post-retirement with 70% wanting to
travel, 30% seeking to help their children financially and 22% planning to pay off their mortgage.
The respondents’ expectation of required retirement income was realistic, being typically two thirds
of salary. However, three quarters had either not done any planning for retirement or had not
revisited their plans for a number of years. Despite this, 50 per cent were confident that they would
have sufficient income in retirement. 70 per cent were expecting their non-pension savings to
provide at least a fifth of their income, which is at odds with ONS data that shows average
households have limited non-pension savings. Half were expecting to use the value of their home to
boost their retirement income.
For those who did expect an income shortfall in retirement, this was an average of £11,400 per
annum. Aside from continuing to work, down-sizing was seen as the most likely solution and the
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average respondent thought that just over £100k could be raised from their home. This reinforces
TISA’s observation that for many people, down-sizing alone will not meet the income shortfall and
additional saving is required.
Given that so many people are either planning to use their home equity, or will do so out of
necessity, TISA believes it is critical that financial guidance and advice considers home equity
alongside other savings to help consumers take a holistic view of how they will fund their
retirement, ideally without need to use their home. It is critical that people banking upon their
home to provide a retirement income have a good understanding of how much this will provide for
them in practice.
A further significant finding was respondents’ negativity towards using equity release. Only 14
people surveyed (0.14%) were planning to use equity release as a means of boosting retirement
income. For those that subsequently realised that they might have an income shortfall to address,
only 6% would use equity release. Whilst, 80 per cent said they were aware of equity release and
two thirds claimed to understand it, their responses to survey questions actually revealed a
significant lack of understanding. This may be driving a reluctance to use the product. Whilst not
advocating equity release as a solution, it may be appropriate for some that need to access capital
and for whom down-sizing isn’t an option. Hence it is important this knowledge gap is addressed to
enhance consumer choice.
Gower Wisdom, Product Director at Old Mutual Wealth and co-author of the report said:
“We have long known that under-saving for retirement needs to be addressed and there is an
increasing urgency to provide the necessary financial planning support to consumers, so that they
can be financially secure in retirement.
A key issue is the need to address the difference in approach between consumers, who count the
value of their house in their retirement income and the industry which does not. Similarly tools need
to be developed so that the public can estimate the value of their property and the costs of downsizing or relocating in order to gain a realistic estimate of their retirement income.
We call for Government and industry to work together to address this issue now to ensure
appropriate support can be made available to consumers, as demand grows amongst the increasing
number of people entering retirement needing to access the wealth locked in their house. This need
becomes more pressing as we seek to respond to the challenges of increasing longevity and later life
care.”
As part of the report, TISA has developed four recommendations for helping consumers plan for and
fund retirement:
1. Enhance consumer awareness: the biggest issue is the lack of consumer understanding
around their likely retirement income shortfall and the actions that can be taken. The
Government and the industry need to rapidly engage in greater consultation to agree an
approach that collectively helps people that are under-funded and entering retirement by
2030
2. Provide holistic financial guidance: we are calling for a holistic approach to financial
guidance of using property/housing wealth to fund retirement as part of financial planning,
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so that consumers can consider all their sources of savings and wealth for supporting them
in retirement
3. Provide holistic financial advice: the advice industry should offer financial planning advice
to consumers which takes the value of the individual’s home in to account and so provides a
more holistic valuation of their retirement income. TISA recommends that professional
awarding bodies review their syllabuses and examinations to support advisers considering
housing wealth as part of a holistic advice proposition
4. Making access to wealth in the home mainstream: As the need to access housing wealth in
retirement builds, consumers will require greater access to products that let them achieve
their goal. For example, the regulatory environment for life-time mortgages needs to be
adjusted to accommodate wider access.
Charles McCready, Director of TISA and co-author of the report said:
“The report has highlighted the need to provide holistic advice to consumers on what their retirement
fund really entails and how we can help them to generate an income that can sustain their
anticipated lifestyle. The Government and industry need to be aware of the gap and expectation for
consumers, and consequently provide them with the tools to measure and realise the individual’s
assets and income, so that sufficient plans can be put into place.”
The results of the research will form part of the TISA policy work on the use of housing as part of a
person’s wealth accumulation and funding for retirement.
Ends
For further information please contact:
Sara Neidle – Telephone: 020 7680 6543 / Email: [email protected]
Alistair Kellie – Telephone: 0207 680 6558 /Email: [email protected]
Email: [email protected]
Notes for Editors
TISA
TISA is a not-for-profit membership association operating within the financial services industry. The
focus of our recommendations and actions is improved outcomes for consumers and UK plc with this
approach leading to a stronger UK financial services industry.
TISA’s growing membership comprises over 150 firms involved in the supply and distribution of
savings and investment products and services. These members represent many different sectors of
the financial services industry, including asset managers, insurance companies, fund managers,
distributors, building societies, investment managers, third party administrators, consultants and
advisers, software providers, financial advisers, pension providers, banks and stockbrokers.
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TISA has a successful track record in working cooperatively with government, regulators, HMT, DWP
and HMRC to improve the performance of the industry and the outcomes for the public. Effective
policy and regulation and the creation of efficient industry infrastructure continues to be the major
focus for our members. TISA is unique in that it represents the entire financial services industry,
incorporating cross-sector policy, industry and technical expertise. Whilst we maintain a solid
partnership with government, the regulators and wider industry, we remain independent and
develop neutral views and opinions. This impartiality is reflected in our ability to drive development
projects which improve industry performance and consumer outcomes, putting us in the unique
position of being able to constantly challenge the status quo to bring about material improvement.
Old Mutual Wealth
Old Mutual Wealth is a leading wealth management business in the UK and internationally, helping
to create prosperity for the generations of today and tomorrow.
It has an adviser and customer offering spanning:
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Financial advice delivered by the Intrinsic network in the UK and AAM Advisory in Singapore
•
Platform based wealth management and protection products delivered by Old Mutual Wealth
in the UK & Italy* and Old Mutual International globally
•
Asset management solutions delivered by Old Mutual Global Investors
•
Discretionary investment management delivered by Quilter Cheviot.
Old Mutual Wealth oversees £119 billion in customer investments (as at 30 September 2016).
Old Mutual Wealth is part of Old Mutual plc a FTSE 100 group that provides life assurance, asset
management, banking and general insurance. Old Mutual is trusted by more than 19.4 million
customers across the world and has a total of £342.7 billion assets under management (as at 30 June
2016).
*Old Mutual Wealth announced the sale of Old Mutual Wealth Italy to Ergo Italia on 9 August 2016.
The transaction is pending completion.
Website: www.tisa.uk.com
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