The Intermediary – August 2025 - Flipbook - Page 61
L AT E R L I F E L E N D I N G
Opinion
Retirement is
changing, so is
equity release
R
ecord numbers of
over-65s are working
past retirement, but
at the same time,
rising numbers
of over-50s are
leaving the workforce through
ill-health and are unable to work at
all. This illustrates how retirement
is changing, and how retirement
planning must change, adding up to a
major opportunity for advisers.
Older customers remain an
important part of the market –
typically they are in their seventies
or eighties, have repaid all or most of
their mortgage debt, and are looking
to increase income in retirement and
improve their lifestyle by using their
property wealth.
But it is the statistics around the
changing workforce that illustrate
the bigger opportunity, and it is
telling how lenders are evolving their
products to meet growing demand for
more flexible options.
The changing workforce
Later life lending must be more
flexible as the needs and wants of the
changing workforce are more complex
than headline statistics show.
Take the record number of over-65s
in the workforce – it is at an all-time
high of 1.4 million and has more than
tripled since the start of this century.
But only around 36% of over-65s
are in full-time work, and around
a third of them are self-employed.
Many will be working because they
enjoy it and want to carry on while
others will be working simply because
they need the money to supplement
retirement savings.
The employment rate for people
aged 50 to 64 is around 70.9%, but is
still below its pre-pandemic record
high of 72.5%. Nearly half (44.9%) of
the 50 to 64-year-olds who are not in
the workforce are unable to work due
to disability, illness or injury.
Many will need alternative sources
of income or to draw on other assets to
meet financial commitments, such as
mortgages or other debt, before they
can access their pensions.
Both groups have the potential
to get substantial benefit from the
flexibility of being able to access
property wealth, and be able to meet
financial commitments or live a
more fulfilling lifestyle. However,
unfortunately, many will not be aware
of the flexibility that modern lifetime
mortgages can offer
The equity evolution
Later life lending products have
evolved, with the development
of more retirement interest-only
(RIO) mortgages, term interest-only
mortgages and long-term fixed rates.
Lifetime mortgage lenders are
offering higher loan-to-values (LTVs),
shorter and fixed early redemption
charges, and increased flexibility
around regular payment options.
These lifetime mortgages which
allow some or all the interest to be
served are designed to help mitigate
the impact of compound interest and
evolve with borrowers as they move
into retirement.
These products offer the option
to eventually transition into a full
roll-up product with a fixed interest
rate for life, a no negative equity
guarantee and certainty of tenure
once any mandatory payment terms
have been met. There are products
available which incentivise customers
to manage their cost of borrowing
by reducing the interest rate while
making regular repayments.
With the modern lifetime mortgage
products now available, customers
WILL HALE
is CEO of Air
can choose their monthly payment
amount and payment term subject to
minimum and maximum terms and
there is no set percentage of interest
payments. Rate discounts can be
available depending on the product
and are based on the customer’s
circumstances, how much they
choose to pay and for how long, and
if they wish they can make voluntary
overpayments. These products are
suitable for a growing number of
customers, whether they are working
or not, and should be seen as part of
holistic retirement planning.
The FCA agrees
The recent Financial Conduct
Authority (FCA) Mortgage Discussion
Paper included a major focus on later
life lending, warning that “older
people may not know about the full
range of options available to them as
they approach retirement” and saying
it “could be that older borrowers
need more effective, holistic advice to
overcome this lack of awareness.”
It cited data that 38% of people of
working age are under-saving for
retirement, and 22% of working
people feel unprepared because they
do not understand their options. That
fits with the changes in the workforce
that have already happened.
Changes in the lives of over-50s
are being met with changes in the
later life lending market. Engaging
with the equity release evolution will
help advisers not only deliver great
customer outcomes, but also grow
their businesses by addressing the
new generation while still helping the
traditional customers. ●
August 2025 | The Intermediary
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