Providing income in retirement is undoubtedly one of the most socially useful activities that the funds industry can do – yet the industry continues to struggle to convince the public about its importance.
At a Funds Europe roundtable yesterday, one participant lamented the industry’s failure to distinguish itself as a solution to the problem of retirement funding.
A report by Tisa, a UK financial services trade body that includes fund and wealth managers, indicates the extent to which the public pin their hopes on their house values as a major source of retirement income.
In its ‘Can housing wealth save the day?’ report, Tisa surveyed over 1,000 UK homeowners aged 50 and over. Seventy per cent were expecting their non-pension savings to provide at least a fifth of their income in retirement, and half were expecting the value of their home to play a role in this.
‘Down-sizing’ was seen as the most likely solution and the average respondent thought that just over £100,000 (€118,000) could be raised from selling their home and buying a smaller one.
Tisa said government and industry needed to make people “get real” about the role their home could play in retirement income. The report is not promoting funds or pension funds as such, but said that retirement planners needed to help people see realistically how much their home could meet income expectations.
To do this, Tisa said it was “critical” that financial guidance and advice considered home equity alongside other savings to help consumers plan for retirement, ideally without the need to use their home.
Gower Wisdom, a co-author of the report and who also works as product director at Old Mutual Wealth, said: “A key issue is the need to address the difference in approach between consumers, who count the value of their house in their retirement income and the industry which does not.”
Three more recommendations were: to provide holistic financial guidance that factors in property wealth; similarly for financial advice with advisers professionally trained to consider property as part of a retirement plan; and “making access to wealth in the home mainstream”, meaning consumers need greater access to products, such as life-time mortgages.
Tisa said the biggest issue was the lack of consumer understanding around their likely retirement income shortfall and the actions that could be taken. It recommended government and industry “rapidly” engage in greater consultation to agree an approach that would help people that are under-funded and entering retirement by 2030.
©2016 funds europe
