A fall in income drives older people to release capital and rent

Tuesday, 25 September 2012

A report released this month from the Centre for Economics and Business Research (CEBR) for Saga revealed that 21 million people over 50 in the UK are worse off as the government tries to stimulate the economy with Quantitative Easing (QE) and historically low interest rates.

The report says that pensioners and those nearing retirement have been hit the hardest, with people in their 50s and early 60s seeing their real income (taking into account inflation) fall by 9% in the past four years, and those aged 65 to 74 seeing an 11% drop as a result of rising prices, low interest rates and QE.

This fall in real income is leading a growing number of older people to sell their homes to release capital and move into rented accommodation. Girlings Retirement Rentals, the UK’s leading provider of retirement rentals on assured tenancies has seen a 32% rise in enquiries in recent years, as many elderly people are finding they need the capital to fund their retirement.

Peter Girling, Chairman of Girlings Retirement Rentals says, “Many elderly people are releasing the capital in their homes to fund themselves through retirement and are moving into rented accommodation. The economic situation, together with pensions not meeting the expected targets is driving this, but also many people want to downsize and don’t want the burden of homeownership.”

“Renting is the ultimate in equity release as people can invest capital from a house sale to fund retirement and at a time when real income and pensions are down this is becoming an increasingly attractive option. However, retired renters want security of tenure in later life; they don’t want to have to move at the whim of a landlord this is why our assured tenancy is so popular, as the choice to leave a property lies with the tenant and not the landlord.  Currently, the private rental market offers very little security of tenure and this must change, to accommodate the needs of older renters and to attract others.”

One couple, who found financial freedom in retirement by stepping off the property ladder,  is Mr and Mrs Dallaway. Graham (64) and Mary Elizabeth (66) Dallaway retired from their jobs as nurses in 2007. The couple were living in Timperley, a quiet village on the outskirts of Manchester, where they enjoyed village life and the ease of the location, with good transport links into the city to make use of its many conveniences.

However, when their daughter moved to New Zealand the couple began to consider where to live in their retirement. With a desire to live closer to family as well as the worry about falling house prices, they decided it might be the right time to sell their house.

The couple saw an advertisement for Girlings Retirement Rentals, the market leader in retirement renting on assured (lifelong) tenancies in the private sector. They were attracted by the fact that renting on an assured tenancy was not only affordable but would enable them to remain in their chosen property for life if they wanted.

They sold their home and invested their capital in shares which will help to fund their retirement needs and decided to try out renting. They moved into a one bedroom apartment in a development in Knutsford, a half hour drive from where they lived.

In July 2010, they decided to move to another Girling’s apartment in Colwyn Bay to be closer to their family and also it was area Graham knew well from his days in in the Royal Airforce.

Graham commented:  “The whole experience of moving, which can be very stressful, was made so easy thanks to Girlings. Within months of looking our house was sold and we were happily settled into our new apartment. We feel more secure financially having sold our house in order to rent. Girlings offered such flexibility in terms of location and encouraged us to choose an area first and then matched us with a suitable property.”

He added: “The helpfulness of the staff has continued throughout our time with Girlings. Whenever we have a problem or need anything fixed they arrange for a contractor to come out quickly. The knowledge that maintenance is included in our monthly bills means we are not faced with charges for repair services or maintenance that you expect with home ownership.”

The Dalloway’s also appreciate the sense of safety they have in their property as each apartment has its own code and security fob. There is also a house manager on site who regularly visits residents to check if they are having any problems and a 24 hour ‘care line’ is also installed in every apartment which can be used in case of emergency.

Graham commented: “Some people hesitate about moving to residential retirement properties thinking they will have to join in all the social activities. My wife and I occasionally join in, but we also like exploring the places around us such as Snowdonia and Anglesey. My wife and I are extremely happy at Colwyn Bay, we’re closer to family and are confident we will have a comfortable and financially secure retirement,” he added.