A widening divide between life expectancy and healthy life expectancy in the UK is strengthening the case for broader access to later life finance options, according to equity release specialist Key Later Life Finance.
New analysis of data from the International Longevity Centre reveals that while overall life expectancy has risen to 82.2 years, healthy life expectancy has increased only marginally, from 70.1 years to 70.5. This has extended the average period people live with illness or disability to 11.7 years — a gap that raises concerns over how the financial demands of later life will be met.
The issue is compounded by a decrease in average working lives. ILC figures show the typical employment span has shrunk from 31.6 to 31.1 years, reducing the time people have to accumulate adequate pension savings. With more Britons living longer but not necessarily healthier lives, and with less time to prepare financially, the pressure on retirement income is intensifying.
Key’s own research indicates that over-65s in the UK collectively hold £2.944 trillion in unmortgaged property equity. With more than 10 million retirees owning their homes outright, the company argues this wealth could be better mobilised to help fund retirement costs, particularly those associated with ill health and increased care needs.
Government data puts average retirement income at £20,120 for individuals and £29,170 for couples. With in-home care costs starting at £25 per hour, such support can quickly absorb much of a pensioner’s income. While remaining at home can offer significant benefits in terms of quality of life and independence, those requiring more intensive support may face residential care costs of up to £1,400 a week.
Will Hale, chief executive of Key Advice, said: “People in later life can have complex and expensive financial needs and the impact of ill-health can make a major difference.
“It is very welcome that people are living longer but healthy life expectancy needs to be considered as part of financial planning. Later life lending options are available but more people need to be aware of them and it is the responsibility of all advisers to take property wealth into consideration.
“Lifetime mortgages enable money to be drawn down tax free which can be a sensible way for over-65s to fund retirement needs. However, everyone’s circumstances are different and it is important that these products, which do have some downside risks, are accompanied by specialist advice.”
