You can’t buy a sausage with a brick

Abe Bacchus, the guy who taught me to sell life insurance in 1984, used this great phrase when a  prospect objected to creating a “capital reservoir” for the future.

Of course a geared investment into bricks and mortar over the next 37 years has created unreleased capital that no equity based  savings plan could match.

But how much equity can the average household release at retirement? Has anyone any concrete evidence that trading down or equity release give a long-term solution to the shortage in retirement income? I was struck by this report in the Guardian..

Research by LV=, the UK’s biggest friendly society, indicates that a third of people aged 50 or more plan to use their home as their pension. Describing such people as “Hippies” (Home is pension), LV said 2 million people over the age of 50 intend to use equity from their homes to boost their retirement income, compared to 1.5 million in 2010.

 Half of those questioned intend to do this by downsizing to a smaller home, a fifth plan to move to a cheaper area, and a further fifth will use equity release schemes.

 Also, only a fifth of those surveyed believed they were financially on track to retire as planned. More than a third (36%) think they will need to delay their retirement for financial reasons, while 16% would rather not contemplate their post-work finances at all.

 Nearly half (45%) of those approaching retirement are considering alternative sources of income after they finish working in light of stock market falls, the research added.

Given it costs at least  £120,000 to double your basic state pension, is the amount of realizable equity , do the generation of thirty and forty year olds destitute of guaranteed occupational plans see the UK Housing Market as their get out of jail free card?

I suspect that the era of “get rich quick” leveraging of double digit growth in house prices IS OVER! The business of saving for retirement through payroll deduction which will become universal over the next few years is by comparison, slow. boring and subject to some short-term setbacks.

However it provides a certainty that cannot be matched by bricks and, as Mr Abraham Bacchus points out – considerably greater liquidity.

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to You can’t buy a sausage with a brick

  1. Pingback: Pension Questions: Release Pension

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