Press releases
Equity release funded over £3 billion of retiree domestic spending in 2021
Modelling by Cebr shows that total retirement spending funded by equity release could top £4 billion this year, as homeowners increasingly look to property wealth to support their retirement.
15 Jun 2022
- Equity release funds currently account for one in every £90 spent by retired people within the UK
- Retirement spending funded by equity release set to rise above £4 billion in 2022
- The number of new homeowners turning to equity release each year is expected to rise by more than a third in the next ten years
- One in five prospective customers cite equity release to help finance care-related expenses
In 2021, equity release funded an estimated £3 billion in retirement spending, according to Legal & General and the Centre for Economics and Business Research (Cebr)’s ‘The Equity Economy Report’1. From this, equity release approximately funds one in every £90 spent domestically by retired people.
Modelling by Cebr shows that total retirement spending funded by equity release could top £4 billion this year, as homeowners increasingly look to property wealth to support their retirement.
Big plans for property wealth by younger homeowners
According to data from Cebr, the share of total property wealth held by over 65s has increased from 28% to 37% over the past 12 years. This, coupled with the rising value of homes in recent years, seems to be driving more homeowners to consider the role that property wealth might play in supporting them financially in retirement. One in 20 homeowners currently use equity release to fund retirement but this is anticipated to almost double to one in 10 (11%) based on the anticipated plans of younger homeowners.
Cebr’s expert housing forecasts found that the average amount of equity released is set to rise above £170,000 within the next five years, despite an expected slowdown in housing market dynamics, resulting in a 47% increase on 2021 levels.3 The total amount of equity released from property is expected to double by 2030 to over £12 billion, as customer numbers increase and the average amount of equity released grows.
One in four retired homeowners (28%) cited having accessed their property wealth through a means other than equity release, for example, re-mortgaging, downsizing or taking out retirement interest-only mortgages. Almost a third of this group accessed property wealth to finance home improvements or renovations.
Property wealth funding day-to-day spending
The majority of equity release spending by retirees is used for occasional big purchases such as home improvements, furniture or even a new car (£1.9 billion). Other uses for equity release include day-to-day expenses, such as such as food, clothes, transport and entertainment (£1.3 billion). The remaining equity used for spending (£480 million) is estimated across international holidays and financial planning.2
The report found that homeowners have most frequently used equity release to finance home improvements (26%). Equity release is also used to support costs such as medical expenses (17%), maintaining living standards in retirement (16%) and paying off personal debt (16%), for example paying off interest only mortgages. Equity release is likely to play an increasingly important role in financing care-related expenses, with 19% of prospective homeowners citing it as a consideration.
Craig Brown, CEO, Legal & General Home Finance: “Our report highlights that homeowners are increasingly planning to use equity release or other ways of accessing property wealth to help fund later life. This shift reflects the boom in property values, which have made our homes such an important asset, but it also demonstrates how far the equity release market has come through the introduction of product innovations and how it has become a more suitable solution for a wider range of people. It has always been Legal & General’s view that changing customer needs and attitudes would see equity release transition from specialist product to a mainstream option. The impact of the equity release market is more significant than just the spending power it gives to customers, it also makes a positive contribution to the UK economy.”
1The Equity Economy 2022, Centre for Economics & Business Research (Cebr) report for Legal & General, April 2022. Cebr was commissioned by Legal & General to analyse the equity release market in the UK. As well as drawing on existing data sources from the Equity Release Council and the Office for National Statistics this report gains fresh insight from a bespoke survey of more than 2,000 homeowners, of which 339 are equity release customers. Fieldwork for the survey was undertaken between 31st March – 7th April 2022 by Opinium.
2In estimating the distribution of equity released by retirees, the following classifications are assumed:
- Day-to-day expenses: food, clothes, alcohol, and tobacco products; transport; education; healthcare costs including residential care; arts, entertainment, and recreation; and ‘other’.
- Irregular domestic spending: electrical equipment, and consumer electronics; furniture and soft furnishings; cars, campervans, and trailers; home improvements, repairs, and maintenance in and around the house; domestic holidays; and buying or renting property.
- Spending on international holidays is analysed in isolation due to this representing funds leaving the UK economy.
- Funds allocated to insurance, savings, pensions or investments are analysed in isolation due to this being distinct from typical consumer expenditure.
3 Average equity release is here defined as total equity released by new and existing customers, divided by the number of new customers
Further information
Notes to editors
Established in 1836, Legal & General is one of the UK's leading financial services groups and a major global investor, with £1.2 trillion in total assets under management1 of which 40% is international. We have a unique and highly synergistic business model, which continues to drive strong returns. Legal & General provides powerful asset origination and management capabilities directly to clients, which also underpin our leading retirement and protection solutions. We are a leading international player in Pension Risk Transfer, in UK and US life insurance, and in UK workplace pensions and retirement income. Our purpose is to improve the lives of our customers and create value for our shareholders. Through inclusive capitalism, we are investing in long-term assets, such as real estate and infrastructure, that can help build a better society for the future.
1Data as at 31 December 2023.
Legal & General Retail helps create brighter financial futures for all our customers. The division covers the savings, protection and retirement needs of our c.14 million retail policyholders and workplace members.
In 2023, we had total individual annuity sales of £1,431 million, and issued £299 million of Lifetime Mortgages and Retirement Interest Only Mortgages. Our Workplace pension platform served 5.2 million members, while our Protection businesses gave peace of mind to several million direct, group and US customers, taking in £1,991 million of UK and $1,584 million of US gross written premiums.