Readers of a certain vintage may recall a BBC television programme, first broadcast in 1965, which succeeded in capturing the imagination of a generation of baby boomers. For its first dozen years, Tomorrow’s World was presented by the brilliant Raymond Baxter, a man famously expelled from Ilford County Grammar School after he was caught smoking.
At 18, Baxter joined the RAF, where he became a fighter pilot during World War II, later getting involved in Forces Radio before landing a job as the BBC’s motoring correspondent.
It was Tomorrow’s World, launched in the wake of Prime Minister Harold Wilson’s reference to the ‘white heat of technology’ at the Labour Party conference in 1963, that brought Baxter to a much wider audience. His enthusiasm for new products, gadgets and ideas was infectious, particularly for millions of youngsters, including your (then) 8-year-old correspondent.
This was unmissable TV which rarely failed to deliver, a programme where you could see bullet-proof vests, flame-proof clothing, both demonstrated ‘live’ in the studio, as well as the first home computers, light pens, touch screens, features on chip and pin, digital watches and a host of other compelling products. Bear in mind these innovations were on display during the mid-1960s.
Mr Baxter frequently assured his audience that the show’s conveyor belt of labour-saving technology would transform our lives to the point where humanity’s most pressing problem would be filling our spare time. Humans would be freed from drudgery because robots and computer-based technology would manage and complete everyday chores, so ensuring the population lived considerably longer, healthier lives.
Almost sixty years on from Tomorrow World’s launch, it’s reasonable to conclude that a number of gadgets, such as home computers, have transformed our lives, while life expectancy has extended by almost seven years for females and around six years for males. However, not every gadget featured on TW has developed into a life-changer, nor have predictions of extreme longevity proved accurate.
Which brings us on to a two-day conference on Artificial Intelligence (AI) which took place at Bletchley Park earlier this month.
On the eve of the conference, Jamie Dimon, Chairman and CEO at JP Morgan, Wall Street’s largest bank, gave an interview to Bloomberg TV. A long-time advocate of AI, Mr Dimon said: “People have to take a deep breath… Your children are going to live to 100 and not have cancer because of technology. And literally they’ll probably be working three-and-a-half days a week.”
Let’s assume for a moment that AI proves a force for good and average UK longevity ultimately increases by a further 20-odd years, to 103 for females and 99 for males. Great news for our children and grandchildren, perhaps, but admittedly, this will not happen overnight. Nevertheless, let us suppose that AI’s initial impact extends baby boomers’ average life expectancy by say, three years over the next two decades. What possible impact could this have on their finances?
To address this important consideration, let us start by assuming that a baby boomer aged 67 has a pension pot worth £170,000 and plans to draw £12,000 a year from it. She envisages increasing the sum withdrawn by 2.5% a year and expects to achieve a net annual investment return of 4%. This combination of returns and withdrawals would last for 16 years, when she will be 83, before her pension pot was emptied.
If, however, a widely predicted AI revolution takes place and results in boomers’ life expectancy increasing by three years, the annual amount withdrawn from the pension would need to be reduced by almost 17%, ie to £10,000 a year, to ensure it lasted for an additional four years, to age 87.
Few people want to reach their mid-80s and start worrying about shortfalls in their annual income, yet as the dark spectre of inflation has stalked savers and investors, corroding their nest eggs over the past 18-24 months, so many people have raided their pensions.
And how. Almost £13 billion of taxed income was withdrawn from private pensions in the year to April 2023, more than double the sum withdrawn in the 2016-17 tax year. Bear in mind this figure does not include the 25% allowance that can be taken from a pension as a tax-free lump sum.
Fortunately, homeowners aged 55 and above have an alternative means of boosting their retirement income, either because they anticipate a shortfall in their pension withdrawals or simply because they want to improve their quality of life.
Naturally enough, some people conclude that the easiest solution to their retirement income quandary is simply to downsize. ‘Let’s get the house on the market,’ they declare, ‘sell it for a chunky profit, pocket the cash and move to a smaller place.’
Life is never that straight forward though, is it? The property market has been flat for a while now, so achieving a selling price that might have been a piece of cake 18 months ago is now significantly more difficult.
Moreover, downsizing is not for everyone: moving away from family and friends, in addition to an activity or social circle built over many years, can be an enormous wrench, while that ‘smaller place’ could be twenty, thirty miles away, or more.
“Selling the family home is not for everyone,” says Mark Gregory, chief executive of Equity Release Supermarket, the UK’s largest independent equity release provider.
“Many people prefer to take advantage of a financial product known as a lifetime mortgage,” adds Mr Gregory. “This enables homeowners to release a proportion of their home’s value as a tax-free lump sum. Furthermore, there is no legal requirement for them to make any monthly payments, however more and more are choosing to make ad-hoc voluntary payments in an effort to reduce the roll-up of interest and retain a greater inheritance for their beneficiaries.
In the meantime, with all lifetime mortgage plans, they retain complete 100% home ownership and have the right to live in the property until they die or move into permanent, long term care.”
The lifetime mortgage is repaid following one of these significant events, usually following the sale of the home. It is, however, worth noting that releasing equity could affect the homeowners’ entitlement to means-tested benefits.
None the less, the tax-free sum generated by releasing equity from the family home can be used for any purpose, including boosting disposable retirement income.
As Tomorrow’s World regularly confirmed, new technology can fail to live up to expectations, but if AI is instrumental in extending life expectancy, it might be prudent to have a plan to pay for those additional years.
If you would like to find out more about the different equity release options then you’re in the right place, Equity Release Supermarket has all the tools you need to check how much you could borrow and at what rate before committing to an adviser appointment. When you are ready to speak with an equity release adviser you can rest assured that all our advisers are whole of market and not tied to any lender so you’ll always be offered the most suitable product for your needs from lenders such as Aviva, L&G and Standard Life.