Macroeconomic research

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
    relative poverty.
  • 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.