London has a well-established reputation as the financial epicentre of the UK, and to some extent even Europe – a hive of high-profile positions and an area of constant infrastructural development, a fact represented by its inflated wages, and inflated cost of living in comparison to the rest of the UK. With London’s situation as an expensive capital, what does retirement look like in the capital? Are those with higher expenses doomed to a lower retirement income overall, or will the majority in London have a higher post-retirement spending power?
Retirement and Equity Release
One of the largest individual investments a person can make is in property, a high-value asset which could make all the difference when it comes to a comfortable retirement. More and more retirees over 55 are making use of equity release programs, whereby a loan is secured against the value of their home and paid off when the home is eventually sold – releasing the money locked up in their home and enabling them to enjoy it in the shorter term. Through the use of equity release, retirees can greatly increase their retirement wealth, having a major impact on their quality of life. But what does this mean for London?
Key Advice’s Property Wealth Findings
Retirement specialists Key undertook a study of prospective retirees in 2020, to discover which regions had the largest average property wealth, and were more likely to take advantage of their property’s wealth to boost their retirement income. London came highest in both fields, with an average property wealth of £661,900 – nearly double the national average – and with 40% of those surveyed intending to leverage their property wealth in retirement.
CEO of Key, Will Hale, had the following to say about the study: “With people retiring this year owning homes worth an average of £388,900 and total property wealth of £142 billion there clearly is a lot of wealth that could be used in retirement. Many will not need to use their home as part of retirement planning, but it is worrying if people are not taking property wealth into consideration due to a lack of awareness of the options available to them or as a result of myths or misconceptions about products.”
Crunching the Numbers
London’s average property wealth is significantly higher than in other regions Great Britain, being 20% higher than the next highest region for property wealth, the South East. But house prices in London have more or less stagnated, with the value of homes outside of the capital increasing apace – and Londoners are more likely to make use of equity release schemes to release wealth for their retirement.
On paper, people in London may be living a wealthier retirement – as their homes are worth more, and more of them are utilising their homes to garnish their retirement wage – but the causes may bely a slightly different picture. The cost of living in London has risen faster than wages in the region, and with house prices uniquely stalled in the region there is not much chance for Londoners to grow their assets. As a result, despite the objective increased wealth, Londoners may well have less spending power than their Northern counterparts.