On this page you will find some of the key points coming out of the report by Oxford Economics examining the impact of equity release on relieving pensioner poverty and on the wider economy.
The report uses data from Just Retirement’s equity release sales and scenario analysis to show how the market may evolve to see how many pensioners equity release could potentially raise out of poverty by 2040. It examines how their additional expenditure will impact the economy, creating GDP, employment and generating tax revenue.
Click here to download the report.
- In 2010/11, some 1.7 million pensioners’ disposable income was below
60% of median household income. This means 14% of all pensioners
were in the Department for Work and Pensions’ (DWP) definition of
- In 2010/11, 0.8 million pensioners (or 9% of total) were counted as
materially deprived using the DWP’s new indicator.
- There are good reasons (closure of defined benefit schemes, increases
in the numbers over State Pension age, growth in the old age
dependency ratio, the poor state of government finances and increase in
longevity) to think that pensioners’ income will decline in the future,
increasing the numbers in poverty.
- In 2011, 16,095 pensioner households took out equity release products.
Given the make up of the households, it is possible to estimate 28,166
pensioners received additional income by undertaking equity release.
- Looking at Just Retirement’s new customers in 2011, 80% took out
drawdown products and 20% lump sum products.
- Survey data on equity release customers’ other income suggests up to
60% are below a relative poverty threshold.
- Using Just Retirement’s data on the equity release products they have
issued and scenarios for future sales, it is estimated equity release could
potentially raise some 1,090,000 pensioner households out of poverty for
a year between 2012 and 2040.
- Equity release is a relatively new product. Supply-side and demand-side
developments mean it will evolve in the future. If customers select a
drawdown product offering £5,000 each year for 12 years, it could
potentially raise between 3.8 and 22.8 million pensioner households out
of poverty for a year between 2012 and 2040.
- Higher levels of equity release would generate modest macroeconomic
benefits over the longer term. These benefits would accrue from allowing
households to make use of capital which would otherwise be tied up in
residential property. One scenario for equity release suggests it may
generate an extra 0.2 percentage points of GDP by 2040. This additional
output would also generate around 22,000 new jobs and produce an uplift
in government revenues.