Individuals facing retirement income falls
24 October 2012
New research has shown the extent to which older people may be set to see their incomes affected when they give up their jobs and go into retirement.
According to a study conducted by the Institute for Fiscal Studies (IFS), as many as one out of every five people in the UK are going to experience a large fall in income when they retire.
It was noted by the organisation that the financial crisis could be set to knock up to ten per cent off the wealth holdings of those who are coming up to the age at which they hope to quit work.
The research, which was funded by the IFS Retirement Saving Consortium, the Joseph Rowntree Foundation and the Economic and Social Research Council, showed that the majority of people currently aged between 50 and the State Pension Age will have a replacement rate of less than 80 per cent.
Rowena Crawford, a senior research economist at the IFS and one of the authors of this report, stated the decline in house prices and the stock market that has been linked with the financial crisis "depleted the wealth of the wealthy by proportionately more than that of those with less wealth", noting: "On average the richest fifth of individuals saw their household wealth fall by 13 per cent or £162,000 - this at a stage in their life when they are most unlikely to be able to make up these losses later on."
This may lead to such individuals looking into products such as equity release plans that are able to improve their financial situation in their later years through unlocking money from the value of their house which can be used for a wide range of purchases.
Data from the Equity Release Council recently showed that total advances of £248.9 million were recorded during the third quarter of the year, an 11 per cent rise on the figures reported by the body for the previous three months.
Those who want to find out more about how equity release can be useful for them in their retirement can get in touch with Key Retirement Solutions for advice and information.
Posted by Tom Papworth