Are we becoming richer or poorer in old age?

Pardon the Interruption

This article is just an example of the content available to mallowstreet members.

On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.

All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.

Older people tend to have considerable housing and financial wealth, but looking at equity release figures and insolvency statistics, could this be about to change? 
 
While research shows that older people are not short of cash, new figures on insolvencies and equity release might be the first sign that things are about to change. 
 
In England, those aged 55-64 had median housing wealth of £185,000 and median other wealth (excluding pensions) of around £33,000, according to thinktank the Institute for Fiscal Studies. This wealth is drawn down only slowly; on average, people draw down less than a third (31%) of their net financial wealth between the ages of 70 and 90. 
 
Many expect care to be a big expense towards the end of life, but while between 2002/3 and 2012 a fifth stayed in a nursing or residential home before death, in total only 7% stayed for six months or more, according to the IFS, and so wealth is usually passed on to the next generation, albeit late. The IFS notes that among those who inherit, this is typically when they are in their 60s. 
 
However, it is possible that trends around wealth in retirement are changing at the moment. The IFS itself says the patterns it has observed could change in the future as “many working age people report expecting to draw on non-pension wealth to provide money for their retirement”. For example of those in their 50s, nearly half (40%) expect to use savings, nearly a third (30%) expect to use their primary housing, and one in 10 expect to use other property to finance their retirement. 
 
If future retirees have lower pensions than current ones, as is likely, “drawing larger sums from housing wealth may become more prevalent”, the IFS writes, usually as people move downsize. 
 

Equity release at almost £4bn 

 
But while older people remain less likely to move, equity release is still at high levels, with nearly £4bn of housing equity withdrawn by older home-owners last year, showing a worrying trend towards a desire or even need for cash in retirement. 
 
Releasing some of the value in their four walls has become a popular way for older house owners to access liquidity. Last year, almost 85,500 people accessed their housing wealth, a record high.  
 
Chairman David Burrowes said that “a growing number of customers are recognising the important role property wealth can play in meeting their retirement needs. This has been driven by competition, falling interest rates, increasing numbers of flexible and innovative product options and supported by rigorous standards in the market.” 
 
In the space of 10 years, the market has grown from £946m to £3.9bn, according to the Equity Release Council, although the 2019 figures have remained roughly the same as those of 2018, perhaps marking a peak or at least a plateau. 
 
While by their nature homeowners have assets, the fact that these need to be accessed could be a sign that retirees are feeling squeezed, or that their children or grandchildren are. 
 
At the same time as these new statistics are out, a freedom of information request by charity Rest Less has shown that insolvencies among women increased significantly between 2008 and 2018,  especially for the over-65s, followed by women aged between 45-54 and the over-55s more generally. While insolvencies among men did not increase across the board, there were increases among men over 65, as well as very young men aged 18 to 24. 
 
Stuart Lewis, founder of Rest Less, said: The rapidly increasing rate of insolvency amongst all women is cause for concern but is particularly concerning amongst women over 55, many of whom are already at higher risk of finding themselves in a financially precarious position: the over 55s are more likely to be made redundant, to be in long term unemployment and to face age discrimination in the recruitment process when applying for jobs.” 
 
He noted that women in their 50s and 60s are also more likely to have taken time out of the workplace and to have caring responsibilities for elderly relatives, partners or grandchildren.   
 
“Add to this, the wide gulf in private pension savings between men and women - due to 40 years of a historical gender pay gap - and it’s no surprise to see why insolvencies amongst women over 65 are rising faster than other groups,” said Lewis. 
 
In 2018, 2,082 women over 65 became insolvent, nearly twice the 1,109 who did so 10 years earlier. Among men and women over 55, the figure was at 16,224, compared with 13,132 in 2008. The numbers are however still higher among those 18 to 55, of whom nearly 100,000 became insolvent in 2018, up from more than 84,000 in 2008. 
 
How do you interpret these figures on equity release and insolvencies?

Ian Neale
Malcolm McLean
Billy Burrows