Britain’s Retirement Crisis: Rising Numbers Forced to Structure Home Loans Extending into Retirement

by | May 14, 2024

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Rise in retirement-extending loans increases from 31% to 42% last year alone

  • 32% of Brits haven’t been able to contribute to their pension due to the increasing cost-of-living
  • 21% of Brits have delayed retirement to keep working due to having insufficient funds in their pension pot
  • 25% of Brits say their biggest mental health strain is worrying about funding their retirement
  • 37% of Brits say their quality of life is going to deteriorate because they don’t have enough money in their pension funds

Rudy Khaitan, Managing Partner of Senior Capital, highlights how Brits need urgent capital to save their pensions

Data obtained through a Freedom of Information request by former Lib Dem pensions minister Steve Webb has revealed a significant rise in the proportion of home loans structured to extend into retirement, climbing from 31% to 42% within just one year. Among Brits aged 30 to 39, 30,943 mortgages were arranged to surpass the UK’s state pension age, with 39% of these approved in the final quarter of 2023. Similarly, for individuals aged 40 to 49, 32,305 new mortgages accounting for 57% of the market, were structured to extend beyond the UK’s state retirement age. These prolonged mortgage terms are a response to mounting house prices and interest rates, underscoring the peril of eroding retirement savings to settle mortgage debts in later life, thus amplifying the already pressing issue of retirement poverty in the UK. In light of this, national research from Senior Capital – the UK’s leading later-life asset platform – also illustrates the devastating impact the cost-of-living crisis has had on Brits’ ability to contribute to their pensions, unveiling that 35% of Brits are currently unable to fund their future retirements forcing the UK’s elderly to continue working.

With disposable household income per head predicted to decline by 1.5% according to the Office for Budget Responsibility (OBR) in 2024, Britain’s recessionary climate has seen the cost-of-living crisis force 32% of the nation to halt personal contributions to their pension pot. Senior Capital’s research additionally found that this recent financial strain has forced 21% of individuals to postpone retirement and continue working, fearing they lack sufficient funds in their pensions. The ramifications extend beyond financial concerns, with 25% reporting that their greatest mental health burden stems from worrying about funding their retirement. Additionally, 37% express profound anxiety about their quality of life diminishing due to inadequate savings. These figures underscore the pressing need for comprehensive measures to address the escalating cost-of-living and its profound impact on retirement planning in the UK.

The Rise of Equity Release:

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. To create financial liquidity, stability and a better 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 the benefit of accessing capital for those approaching retirement age through equity release products:

“In today’s society, many over 55s find themselves in a paradoxical situation – they are ‘asset-rich’ due to the value of their homes, yet ‘cash-poor’ with limited disposable income. As the cost of living continues to rise, many find themselves struggling to make ends meet, despite owning valuable properties.

“Equity release offers a solution to this dilemma by enabling homeowners to tap into the wealth tied up in their homes. It can provide a much-needed cash injection to enhance their quality of life, cover unexpected expenses, or even help their families. Equity release is more than just a financial transaction; it’s a means of bridging the gap between asset wealth and living standards, ensuring that those who have worked their whole lives to build their assets can finally reap the benefits of their hard work.”

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 

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