In contrast, the average retirees’ income has risen by just 46%, equivalent to an extra £6343 in their annual budgets.
This has taken their average gross income from £13,786 to £20,129.
With the Government capping individual contributions towards the cost of long-term care at £72,000, it would take 11.4 years of putting this extra income to one side before reaching the amount retirees need to spend before they can access state support.
The instability of the property market in recent times has at least allowed retirees’ incomes to regain some ground on house prices in terms of their rate of increase. Property values have fallen by 8% in real terms over the last five years, compared with a 4% growth in retirees’ income.
However this has not been enough to rival the overall growth rate of property values over the last fifteen years. Before the financial crisis of 2007/8, the contrast was even greater: typical house prices rose by 31% in the previous five years (vs. 18% – pensioner income) and by 107% in the previous ten years (vs. 40% – pensioner income).
Falling income from investments has meant that pensions have become increasingly important as a source of income for UK retirees. While investment returns typically made up 16% of their income 15 years ago, this has fallen away to just 6% in 2012.
At the same time, retirees have been more reliant on private pensions and annuities, which now account for 40% of their income, compared with 37% five years ago and just 32% fifteen years ago. Since the financial crisis, state pensions have also grown in importance and now make up 38% of retirees’ income (compared to 36% five years ago).
Nigel Waterson, Chairman of The Equity Release Council, said: "What we are seeing is a new reality emerging in terms of retirement income as people increasingly look to pensions and annuities, rather than investments, to finance their later years. However, the uncertainty surrounding many funds means that people’s property is very often their biggest and most secure financial asset, with a far greater return on their original investment.
"Particularly if they bought their homes some time ago, many will have a large amount of equity tied up in their property that can relieve the pressure on their retirement income and help with additional expenses. In many cases, equity release can offer retirees an alternative to selling their property – one that preserves their domestic comfort as well as their attachment to the place they call home.
"Whether choosing a lump sum or regular monthly payments, equity release customers can enjoy the relief of an extra source of retirement income, safe in the knowledge they are free to remain in their homes for the rest of their lives, if they choose to, and will never owe more than the property is worth."
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