Your property wealth could save you from working for an additional three years, says finance expert Peter Sharkey.
“We may allow ourselves a brief period of rejoicing, but let us not forget for a moment the toils and efforts that lie ahead.”
Churchill’s famous line, delivered to the euphoric British people on 8 May 1945, was one of many we heard during the recent VE Day celebrations. While he was referring in part to the ongoing war against Japan, which was expected to drag on for at least another 12 months, most people understood that the Prime Minister was telling them to celebrate, but not to forget that there was an almighty rebuilding job to do once the rejoicing was over.
I wonder if we can expect something similarly uplifting-but-cautious from our current Prime Minister once the Covid-19 crisis has passed? I hope so; if nothing else, it should signal the start of much needed celebrations and the corresponding end to restrictions that most of us have accepted without too much fuss.
Anticipating a lifting of restrictions and a subsequent, post-virus consumer spending splurge, a line in one of last weekend’s newspapers asked, “Is increased time spent at home prompted you to reprioritise your home-improvement wish-list?”
My initial response was a resounding ‘no’, but that was before I stared out of the kitchen window, noting that while the garden looked in particularly good shape (because we’ve spent so much time in it over the past two months), a new rear fence wouldn’t go amiss. And yes, the long-discussed patio would look attractive on such a sunny day. While we’re at it, how about replacing the tatty shed we inherited with something befitting a decent ‘man-cave’?
However, successful execution of such plans, assembled within a few minutes as the kettle boiled, would not be cheap, a conclusion which triggered the completion of an alternative 3Rs: rejoicing, reprioritising and retirement.
We’ve dealt briefly with the first two, but last Wednesday, insurance giant Legal & General (L&G) published a report which suggested that more than 1.5 million people could be forced to delay retirement after their pension returns were pummelled.
L&G found that on average, people who had seen the value of their pension pots plummet would stay in work for an additional three years, presumably to make good the losses suffered since the start of the pandemic. If accurate, this finding will result in large numbers of people being cheesedoff.
Without exception, everyone I know aged over 55 who is within sight of, or already retired, doesn’t want to finish work altogether. Most would prefer working 2-3 days a week and not just for the money. Staying in touch with workmates, enjoying workplace banter and keeping the brain active are regularly cited as reasons why people wish to avoid the caricatured slippers-and-pipe retirement.
No wonder that pre-virus, employment levels for the over-65s stood at a record 1.42 million people. But what if your pension plan has taken a hammering and your virus-influenced calculations suggest that you have to continue working, full-time, for a further three years in order to achieve your financial goals?
This will come as quite a blow to many. Instead of working part-time, an arrangement which usually accommodates long weekends away, perhaps a midweek game of golf, or the opportunity to see loved ones more frequently, the immediate prospect may now look considerably less attractive.
Three more years of full-time employment, working 9-to-5, simply to counter the spiteful effects of Covid-19, was not a widely-anticipated prospect.
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Yet although many folks will feel their financial situation has been compromised by this malevolent virus, for homeowners aged 55 and over, the demographic most likely to have to work an extra three years, a possible solution exists.
Property wealth is increasingly referred to as older homeowners’ ‘hidden savings’. Moreover, releasing a percentage of this wealth can help people adhere to their original, pre-Covid-19 retirement plans.
Releasing equity from the home can affect an individual’s entitlement to means-tested state benefits and reduce the value of their estate, but accessing tax-free savings accumulated over many years that were once hidden within a property could help repair retirement finances severely damaged over the past few months.
If the prospect of working full-time for an extra three years fails to fill you with glee, you may wish to consider equity release.
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Equity release: Your questions
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For more financial advice, check out Peter Sharkey’s regular column, The Week In Numbers.