Britain’s public finances under threat unless the UK’s retirement age is raised to 70 by 2040

The International Longevity Centre warns that Britain’s public finances will face significant challenges unless the retirement age is raised to 70 by 2040. This is due to an ageing population which will lead to a decrease in the ratio of workers to retirees. Currently, the state pension age is set to increase to 67 in 2028 and to 68 by the mid-2040s, however, the study suggests that workers in their 40s may need to wait until they are at least 70 to retire. The triple lock policy, which ensures the state pension increases annually by the highest of 2.5%, wage growth, or inflation, is under already scrutiny with the UK government committed to maintaining it until 2024-25. With pensioner benefits projected to cost the government £136bn in 2023-24 and state pensions accounting for 91% of expenditure, Rudy Khaitan, Managing Partner of the UK’s leading later-life lending specialist, Senior Capital, argues the triple lock is not sustainable and that equity release products stand out in addressing the financial needs of pensioners during their lifetime.

Rudy states that though the state pension will in the immediate future improve the economic situation for UK pensioners, with some pensioners seeing their state pension surpass £11,000 for the first time, it will not fully reduce the heavy financial burden on them and their families. ILC’s report also highlights the challenges faced by Generation X in saving for retirement, with many at risk of retiring with insufficient income. Younger generations also have fewer financial assets compared to their predecessors. This is why equity release still stands out as a proactive solution. The UK equity release market having grown by 100% in the last five years and is now seeing record activity as consumers continue to feel the financial impacts of inflationary pressures and consistently high interest rates. By unlocking the value tied up in their properties, UK pensioners can access a substantial source of income which provides immediate financial relief and is also tax-free – allowing pensioners to maintain their standard of living during the UK’s cost-of-living crisis.

Rudy also argues that it is essential to recognise that equity release can provide a tangible and immediate solution for pensioners, offering them the means to enjoy their retirement years without compromising their financial well-being and the ability to pass on wealth to their families. Many Brits have turned to equity release as an alternative financial vehicle to access their frozen capital amidst a turbulent economic climate – with the 2023 total currently sitting at around £5bn – highlighting an alarming number of the population who are struggling financially. The same data from Equity Release Council shows that over 55s have taken out a record 13,452 new equity release plans between July and September, drawing a total of £1.7bn out of their properties in Q3 alone.

Managing Partner of Senior Capital, Rudy Khaitan, comments:

“As the triple lock will help unlock more wealth for British pensioners, equity release products will be required to pass on more of that wealth to their heirs. Equity release stands out as a proactive solution that addresses the financial needs of pensioners during their lifetime. The UK equity release market has grown by 100% in the last five years and is now seeing record activity as consumers continue to feel the financial impacts of inflationary pressures and consistently high-interest rates.

“In today’s society, many over 55s find themselves in a paradoxical situation – they are ‘asset-rich’ due to the value of their homes, yet ‘cash-poor’ with limited disposable income. As the cost of living continues to rise, many find themselves struggling to make ends meet, despite owning valuable properties.

“Equity release offers a solution to this dilemma by enabling homeowners to tap into the wealth tied up in their homes. It can provide a much-needed cash injection to enhance their quality of life, cover unexpected expenses, or even help their families. Equity release is more than just a financial transaction; it’s a means of bridging the gap between asset wealth and living standards, ensuring that those who have worked their whole lives to build their assets can finally reap the benefits of their hard work.”