Equity release could unlock £1.5trillion pot of property gold by 2029

12 August 2009 / by Rachael Stiles

The over 65s could own a projected £1.5trillion in property by 2029, and might need to use equity release to access this cash and fund their retirement.

Research from retirement planning group Sovereign Relations has predicted that pensioners will be sitting on the £1.5trillion goldmine within 20 years, which, combined with constricted pension provision and longer life expectancy, could come in handy.

Already holding three fifths of UK property equity, amounting to £800billion, the over 65s' hold on the UK's property wealth will rise 88 per cent by 2029, the study has revealed.

Equity release could be in increasingly high demand, Sovereign Relations predicts, especially as pensioners find other doors closing to them, such as final salary pensions, 72 per cent of which have already closed to new entrants.

The projection is based on a rise in property value during the coming decades, but, Sovereign Relations says, even if house prices remained the same, the over 65s' property equity would still grow to £1.2trillion in today's terms.

Additionally, rising life expectancy means that by 2029, the over 65s will represent 21 per cent of the population, compared to 16 per cent of today's population, and the number of people aged 65 or older will double to 15.1million, putting increasing pressure on pension provision and other forms of retirement funding.

Even in the current trough of today's housing market, the over 65s each own an average £193,000 of housing equity, Sovereign Relations' research shows, and in 20 years time this figure will soar, opening up more avenues to funding retirement through equity release.

Commenting on the predictions, Graeme Marshall, chief executive of Sovereign Reversions plc, said: "Equity release is one of the industries riding the demographic megatrend of an ageing population. The UK’s property assets are increasingly concentrating in the hands of the older generation. 

"Older people typically own more valuable homes than the average and the vast majority have no mortgage debt left," Mr Marshall continued.

For those who have no other way of compensating the shortfall in their pension, "the value of their home will be the most obvious source of cash to support their income in retirement," he said.

Once all other avenues have been exhausted, "There will be no alternative to ensure pensioners have can enjoy a reasonable living standard in their old age."

© Fair Investment Company Ltd

Equity release is not suitable for everyone - learn more and get free equity release advice and quotes to see if it's right for you.