Recent research by later life lender, more2life, highlights that individuals on pension incomes have seen minimal improvements in their real standards of living over the past decade. Pensioners have experienced only a 1% per annum increase in average weekly pension income, accounting for inflation, from 2013 to 2022.

ONS data indicates that between 2013 and 2022, the average weekly pension income increased by just £29, rising from £320 to £349. Pension incomes peaked at an average of £376 in 2021, but then decreased by £27 in 2022, marking the first decline since 2017. The average is expected to have fallen again last year due to continued economic turbulence and rising living costs, creating financial challenges for elderly individuals on fixed retirement incomes.

In contrast, average house prices increased by 67% (not accounting for inflation) between 2013 and 2022. This means that many individuals over 50 own properties that have significantly appreciated in value. Accessing this housing wealth could provide retirees with additional income or be used for discretionary spending.

Ben Waugh, managing director at more2life, said: “Our analysis shows that while pensioners have received very little in the way of income growth over the last decade, the value of their homes has accrued substantially. On the one hand, rising house prices can be an encumbrance for borrowers, with mortgage repayments often rising in tandem. However, it does mean homeowners will have a larger sum of equity tied up in their property, should they wish to unlock it – funds that can either be used to augment stagnant pension pots, help grapple with higher mortgage repayments, or even be put towards financing home improvements or a family holiday.”

JLL’s analysis of the Bank of England’s Mortgage and Lending Report shows that more than 62% of the 8.4 million owner-occupiers in the UK have at least 25% equity in their property. Just over a third (34%) have between 10-25% equity, 4% have between 5-10% equity, and 0.2% have less than 5% equity.

Waugh continued: “The majority of UK homeowners have at least £70,165 worth of equity tied up in their property – a substantial sum of money. Equity release can serve as a vehicle to unlock these funds, with an increasingly diverse suite of later life lending products available on the market for over-50s. However, before coming to any conclusions, borrowers should seek the expert guidance of an independent financial adviser. It is important individuals are made aware of all the options that are open to them, and crucially, what option will produce the best outcomes for their personal needs – even if this means being advised against later life lending.”

This analysis underscores the contrast between stagnant pension incomes and rising housing values, offering potential financial solutions for retirees facing fixed incomes.