A third of over 65s live on less than people on minimum wage

A third of those over the age of 65 are living on less than they would make on the minimum wage. Two in five of them say they have 'gone without' in order to make ends meet, and over 150,000 of them say they struggle to pay their utility bills. Given that 68% of them say they have equity in their home, is there an obvious solution?

People are living longer than ever, and with many relying on their state pension alone, they face decades on a low income, finding it harder and harder to make ends meet. A study by LV= found that quarter of them have given up taking holidays abroad, while 16% can't imagine buying a new car, 15% have stopped eating out, and one in twenty say they can no longer stretch to birthday and Christmas presents for friends and family.

Of those living on less than the minimum wage, more than half have had to go without in order to stay within their budget, and one in seven say they can no longer afford to replace household goods that have come to the end of their natural life.

This horrible situation is one reason why one in four people seeking guidance on their pensions in the wake of new freedoms are also asking for help on other issues - with 42% asking for help with benefits and tax credits, 29% asking for assistance in managing their money and 14% asking for advice on debt.
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Is their home the answer?

At the same time, LV='s research shows that 83% of the over-65s own their home and are sitting on an average of £235,750 in property equity. Only 7% of them have released some of the equity in their property in order to secure a more comfortable retirement. It has suggested that people consider equity release when they are thinking overall about their income in retirement.

It's worth pointing out that these schemes don't suit everyone. If you take money out of your property using a lifetime mortgage, the interest on the sum you have taken will roll up until you die or sell the property - and will be far higher than a standard mortgage.

If you borrow money from the value of your home early in your retirement, the amount that needs to be repaid when you sell up can easily be more than double the sum you borrowed in the first place. In addition, if you want to sell your home early and repay the money, you could face expensive early repayment fees. It means it's essential to consider the total cost of this approach - and talk it through carefully with family.

Alternatives

Some families prefer to consider downsizing in order to free up a lump sum. Unfortunately this isn't foolproof either, because you cannot guarantee you will be selling at a good time, or that there's a sufficient gap between the price of the family home and the cost of a smaller property to cover all the costs of moving and still leave a sensible lump sum.

Others will find creative solutions that suit their family better. Increasingly, for example, older people are considering renting out a room or two in their new property, especially as the government has introduced tax breaks to help them do so.

Others will talk to family, who may be interested in some sort of mutually-beneficial financial arrangement. They may, for example, invite the older member of the family to move in, then rent out their home and split the proceeds. Alternatively, they may want to swap properties in exchange for a lump sum.

Every solution to this problem has its pros and cons, and for every family the right answer will be different. The important thing is to be aware that there is a solution, and to have the conversation with your family to work out the right one for you - rather than just assuming you have to keep managing on the bare minimum.

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