Later Life pension pot boosted by 181% via equity release

Everyone will eventually age, which means we’re all going to be faced with Later Life mortgages, but how exactly are they beneficial at that point in time?

Leading mortgage broker, Henry Dannell, has taken a closer look at how the average homeowner using equity release via Later Life mortgages is able to supplement their income by a fifth, while also revealing that it can bring about a boost to the average pension pot by as much as 181%.

When it comes to supplementing lifestyles, equity release is a popular method for those aged 55 and over.

The study carried out by Henry Dannell has disclosed to what extent UK homeowners are able to increase their income or pension pot when putting these Later Life mortgage products to use.

Director of Henry Dannell, Geoff Garrett, commented: “Equity release is a fantastic option to suit a range of needs, and many will utilise it to help their children or grandchildren tackle the high cost of homeownership, to add value to their home, or to make other sizable acquisitions.” 

“However, it’s also an increasingly common method of supplementing our income in later life, or our pension pot once we’ve retired. With a little careful planning and a staggered approach to spending, doing so can help provide a significant financial cushion throughout the entirety of our golden years.”

Dannell also stated that given the difference this can make and the current cost of the living crisis impacting many households, it’s no wonder that the popularity of equity release has grown so significantly.

How it’s done

Recent figures show that those aged 55 and over are releasing equity from their homes to the tune of £111,511. The UK’s average life expectancy currently sits at 82 which equates to a boost of £4,130 per year over 27 years.

For those that earn an average net income of £26,483 and are aged between 55-59, this additional £4,130 per year equates to a 16% increase in their annual level of income.

Those aged 60 and above will earn an average annual net income of £20,787, thus meaning that equity release can help supplement their earnings to the tune of 20% per year.

The pension pot of gold

The research also shows the average Baby Boomer has a private pension pot of £61,156, which they can normally start to draw from once they reach 55. Supplementing this nest egg with the average level of equity release (£111,511) would bring about a 181% increase in the total value of this pension pot.

Those solely reliant on a government state pension would receive a total of £144,417 in annual instalments of £9,628 between the current retirement age of 67 and the average life expectancy of 82.

If an additional £111,511 is added via a Later Life mortgage would increase this figure by 77%.

The average level of equity release would still supplement their pension pot for those benefiting from both a private pension pot and a state pension (£205,963), with a notable 54% increase, bringing it up to £317,474.