Why is it homeowners work and save hard all their lives to afford a comfortable retirement and then one in three blow their cash on holidays?
Everyone likes a break and has dreams of travelling the world, but the average 55-year-old is taking £6,785 staked against the equity of their home to finance the trips.
Equity release firm Key Retirement says 30% of homeowners are releasing cash from their properties to fund holidays – and some are taking an average £58,850 to buy a holiday home.
Time is one factor. The holidays may seem expensive, but retirement is the first time many people have a month or two they can put aside for a trip of a lifetime.
The research revealed many retirees take the money to pay for visits to relatives and loved ones in far-off destinations, such as Australia, New Zealand, Canada and the USA.
Unlocking money from a home
But those loans cost a lot of money, even if the interest is rolled up against the value of the home and is not paid back until the property is sold.
Homeowners in London and the South East are most likely to take equity release, says Key Retirement technical director Dean Mirfin, mainly because their homes are worth more than those in the rest of the country.
“With an average spend approaching £7,000 for holidays, travel is a popular choice for those unlocking cash from their homes, often alongside other uses to improve their lifestyle in retirement,” he said.
“Whether it’s jetting off to exotic climates, purchasing a holiday home or visiting relations in far-flung corners of the world, property wealth is providing the opportunity for over-55s to visit places they have previously only dreamed of. It is also enabling many to have a second home in the UK or abroad, which for many would not be possible without access to the wealth tied up in their main homes.”
Other concerns about spending retirement savings were recently raised by the Association of British Insurers, the trade body for pension providers.
Pension freedom statistics showed that close to 3,500 savers withdrew 10% or more of their funds in the past year, prompting fears that they would run out of cash early in retirement.