The Role Of Group Risk & Employee Benefits In Funding Retirement Years

In Employee Benefits, Industry News, Protection by Stephen Ellis

The UK’s younger generations are three times more likely than older generations to use property investments to fund their retirement, new research suggests.

According to the study by Canada Life, one in 10 (9%) individuals aged 16-54 years old expect to live off the wealth stored in their homes after they retire. That’s triple the number of people aged 55 and over, suggesting younger generations think that property will play a significant role in supporting them financially in their later years – a reality that emphasises the potential for equity release.

The research also shows that around half of under-55s believe their state or workplace pension will provide them with sufficient funds when they retire. Meanwhile, one-in-five (21%) people in the same age group say their savings will cover their retirement income needs.

However, data suggests that such sources of income may not be available when the time comes. That’s because following the pension freedom reform in 2015, the number of people drawing down on their pensions has increased significantly. Indeed, in April 2019, HMRC witnessed record tax receipts, suggesting more and more people were accessing their pensions in earnest.

A rude awakening for some…

Moreover, the 21% of people who believe their savings will be enough to support them in later life could be in for a ride awakening. That’s because research shows that younger individuals tend to underestimate their life expectancy. As a result, many could be left with insufficient funds to meet their retirement needs.

Speaking about the findings of the research, Alice Watson, head of marketing and communications at Canada Life Home Finance said: “It is good that the younger generation recognises that they can unlock wealth from their property in retirement. This openness is likely driven by the reality that many under 50s will receive less generous pensions under the defined contribution scheme, compared to the majority of the older generation on the defined benefit plan.”

How group risk and employee benefits can help

Equity release products can help people enjoy their later years and live the kind of lifestyle they want by enabling them to release some of the value stored in their home. However, the income provider will need to be repaid at some point, and this usually occurs when the homeowner dies.

So what has all this got to do with group risk and employee benefits?

Well, on the face of it, absolutely nothing. However, when you step back and analyse the situation a bit more you realise that many of the younger generation are looking at lifetime mortgages funded by guess what… their salary. So, if they cannot work due to ill health or injury, not only do they lose their house, but also their retirement plans along with it – so instead of a lifetime mortgage, a lifetime of poverty beckons.

Group Income Protection provides the mechanism to protect against this and it can cost from under 0.5% of salary roll. Now that is looking after your employees!

Stephen joined Premier Choice in 2006 as a Group Risk consultant and became Head of Group Risk in June 2013. In December 2017, Stephen also took over responsibility for the Protection division within Premier Choice and works to grow this in the same way he has the Group Risk division. Protection is a specialist area and fits well with his experience and expertise in the group risk market.