Equity release funds retirement optimism

Jon King

As any actuary who has worked in equity release will tell you, people with home income plans live longer on average than the population as a whole.

It may be tempting to suggest a positive correlation with taking out a product. But the more realistic conclusion is that the sort of person who takes out a scheme has a more positive outlook on life, which encourages longevity.

A recent study by the National Academy of Sciences in America added depth to work on peoples’ perceived well-being and the UK government also recently launched a regular analysis of peoples’ happiness.

The NAS study has identified the U-bend effect, which establishes that part of how good you feel depends on your age and that getting old doesn’t have to mean getting unhappy.

People experience a high point of a feeling of well-being in their early 20s. This tails away until age 45-50, when things improve and continue to get better right up to the 80s. In other words, people get happier as they move into retirement.

The problem is how to fund this improved optimism – maybe the correlation with equity release is not so strange after all.

And, as French singer Maurice Chevalier once said: “Old age isn’t so bad when you consider the alternative.”