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Equity release... providing more meat for the sandwich generation?

Demand for equity release products is continuing to grow – this is one thing which advisers involved in the market are very much agreed on. 

Something else they tend to agree on is the fact that there’s no such thing as the ‘typical’ equity release customer. There are so many different motivations behind the desire to release capital from the value of a home. But we can easily identify clients whose life stage and circumstances suggest they’re particularly likely to benefit from this type of product.  

The ‘sandwich generation’ is faced with a set of pressures and aspirations that combine the demands placed on people within other age groups and life stages. Often not too far away from retirement themselves – with everything that entails – they also take responsibility for the needs of the generations both above and below their own. 

Maybe there’s an aged parent whose long-term care needs to be funded... a son or daughter struggling to get a foothold on the property ladder... or grandchildren whom they understandably want to spoil a little... 

Faced with a juggling act such as this, the sandwich generation has more than enough on its plate. 


Making the case for equity release 

Irrespective of the many challenges they face, ‘sandwich generation’ clients will often be well placed to take advantage of the benefits which equity release can offer. With 66% of over-55s owning their homes outright1, many of them will have been in a position to benefit from property market gains. Like other ‘baby boomers’, they’re less likely to be averse to borrowing than their own parents were at the same life stage – and more likely to have high expectations of their quality of life in retirement. 

At the same time, they may not feel confident that – when the time comes – their children will be able to offer them the same level of support they offer their own ageing parents. This might be due to a lack of geographic proximity or greater financial constraints. The result is a degree of awareness that finance needs to be in place for their later years. 

People of this generation are also likely to see the wisdom in helping their loved ones to benefit from financial help while they themselves are still around to see it. Using Equity Release to provide a ‘living inheritance’ also means that beneficiaries would receive a lifeline at the stage in life when they are likely to need it most.

 

The sandwich generation... who are they? 

First coined in 1981 by American academic Dorothy Miller, the term ‘Sandwich Generation’ refers to a generation of people who care for their ageing parents while supporting their own children. Three sub-groups are normally identified:

·         Traditional: those sandwiched between aging parents who need care and/or help and their own children.

·         Club Sandwich: those in their 50s or 60s sandwiched between ageing parents, adult children and grandchildren, or those in their 30s and 40s, with young children, ageing parents and grandparents.

·         Open Faced: anyone else involved in elder care.

        Source: www. sandwichgeneration.com


A little more education 

Paradoxically, the inter-generational commitments which suggest a client might be suited to equity release are sometimes cited as reasons why they don’t want to go ahead. Simply having ‘too much on’ to think about further responsibilities and perceived risks can be an issue.  If this is the case, some education about the true nature of modern lifetime mortgage products may well be called for. 

Many people’s perceptions are coloured by certain equity release products which have now largely been consigned to history. They are often relieved – and even surprised – to hear that they need not face imagined risks such as losing their home, or of passing on debt to their offspring. 

Once they fully understand the detail behind the products now available, and are aware of the substantial regulation surrounding them, clients increasingly begin to look upon their property in a new light – as a potential source of future income. This surely suggests that equity release will continue to gain popularity as an important ingredient in financial planning for the sandwich generation.

 

References 

1 Spring 2014 Real Retirement Report

 

 

 

[Sponsored article by Aviva]

 

 

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Author: IFA Life Sponsored Post
Posted: Wednesday, June 18, 2014 | 7:03:45 AM


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Comments

03 July 2014 | 11:35:55 AM  Surendra Chhabra wrote:
Could you please send me your literature/conditions for property Equity Release. to enable me to be better informed. Many thanks.
S S Chhabra, 54 Sandbourne Avenue, Merton Park, Wimbledon, London SW19 3EN

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