Andrea Rozario looks at the shifting demographics of the equity release market and says products must reflect the decreasing average age of clients
Equity release is seen as a ‘later life’ lending option, we all know this. But, for how long? The average age of a lifetime mortgage customer still sits at a shade under 70, but myself and advisers alike foresee this creeping down year on year.
Right now, I think you’d still call 70 ‘later life’ but I’m sure many pensioners, and perhaps some of my friends and family, would strongly dispute this. To be honest, with life expectancy still, in the main, on the rise, I think I might agree that 70 really isn’t that old at all. But, for right now, I think it’s safe to say that equity release is still in the realms of ‘later life lending’. But this will change.
It’s not just me spouting off about this, those at the coalface broadly agree. According to research from November 2020 conducted by Canada Life, 57% of advisers said that they thought that the average age of their customers will fall. A strong majority then but, in my opinion, the number of advisers thinking this way will only rise in time as all the evidence is pointing to a reduction in average age. But why?
Changing circumstances
Firstly, the whole framework of our finances in ‘later life’ has changed. The days where most people can rely solely on their pension to fund their retirement are gone. Today, property wealth is an integral part of later life planning and equity release can be a good option for thousands of homeowners.
According to another recent report, around three in four people are at risk of totally emptying their pension pots way before the end of their life. So, another funding avenue must be explored for the majority of pensioners, and with most homeowners over 55 sitting on a considerable pot of property wealth, options like downsizing or equity release will become ever more popular.
But why the age decrease? In my opinion, this comes down to a societal issue and a variation between generations. Tomorrow’s pensioners are far more used to lending money, taking out mortgages and everything else that goes into modern finance. Generation X, the next big swell into the retired population, will be more open to offerings like equity release and will drive the average age down even further.
The more the merrier
The significance of this age shift will be huge for our industry. In the simplest of terms, younger customers mean more customers in general. If the average slips down into the early sixties, the potential pool of clients will grow massively.
Of course, equity release will still remain an option that needs to be considered carefully and will never be perfect for everyone, regardless of age, but a larger number of potential customers will accelerate the growth of the entire industry. More lenders will join, more choice will be offered and an increase in flexibility means we can continue to evolve with our clients’ needs.
Secondly, the younger the average age goes the closer we can get to mainstream acceptance. It will be a huge coup for equity release as a whole to no longer be seen as some fringe offering, exclusively focused on a small number of elderly customers. Of course, we can still serve and advise older clients, but modern equity release should be seen as an offering that can help anyone from age 55 and above (depending on their circumstances) - and this will soon be the case as our customer base gets younger.
Younger target market
So, with this future planning in mind, we should also be looking to design products and packages that suit younger customers. Right now, the market is crying out for products specifically aimed at this younger cohort. We need an increase in new options aimed at the 55 - 65 market, to complement all the current products that already exist that may be better suited for those a little older.
In the near future, I would like more choice and flexibility and equity release to be seen as an offering that can serve people in the ‘second half’ of their life, rather than just the end.
The decreasing average age of our customer base will have huge knock-on effects for everyone in equity release, and we all need to be ready to give the best advice to someone in every situation and every age bracket.
As life expectancy creeps up and our average age slides down, I don’t think it will be long until most of us see equity release and later life lending in a totally different light.
Andrea Rozario is chief corporate officer at Bower
