Housing wealth has the potential to improve seniors’ well-being

Existing housing wealth has the potential to respond to the increasing need for senior care services. Releasing housing
wealth could give seniors more individual choice regarding their care, and also increase consumption-based tax income and the availability of housing for younger households. In the Silver Economy Forum in Helsinki, experts also discussed the need for private pension and care insurance policies, and the ways to combine them with the public social security system provided by the society.

As people get older, they tend to receive less income while requiring more care services. Households typically have most of their wealth tied in their housing where it cannot be used for anything else. A logical solution is to release some of the housing wealth, by moving to a smaller house or apartment, or by switching from owned to rental home. Even though this would help with purchasing more care services, many households remain reluctant to do so. This may be because of personal preferences, because of a fear of running out of savings, or because suitable pension insurance options aren’t always available.”If seniors could release their housing wealth, many of them could buy private care services, enabling them to live at home for longer. But it would also benefit the rest of the society by generating more consumption-based tax income and by increasing the availability of housing for younger households”, says Niku Määttänen, research director at the Research Institute of the Finnish Economy (ETLA).

In his speech at the Silver Economy Forum, Määttänen called for new types of insurance policies which could make it easier to unlock housing wealth. Private pension insurance policies do already exist, but they tend to require long-term saving.

”Seniors should have the option for competitively priced single-premium pension policies. With them they could have a steady source of additional income for the rest of their lives. The advantage of a lifelong pension policy is that people don’t have to refrain from using their savings just because they might live unusually long and therefore run out of savings. Also, care insurance would be the most efficient way to prepare for the need of long-term care, because it doesn’t require such a large amount of savings”, Määttänen continues.

Piia-Noora Kauppi, managing director at Finance Finland (FFI), agrees with Määttänen in that we need new ways to fund senior care services. A recent survey commissioned by FFI revealed that Finns prefer seniors to use their wealth for their own well-being rather than on the inheritance they’re leaving behind; three out of four respondents thought this way, age having no significant effect on the responses.

”It is senseless that many people have the most wealth on the day they die. Those who can afford it should be encouraged to spend more on their well-being”, Kauppi points out.

According to Määttänen, changes to taxation could help with utilising housing wealth. Care insurance compensations should be tax-free, and the housing transfer tax should be replaced with a property tax. It should also be ensured that utilising housing wealth does not result in, for example, the assisted senior home becoming more expensive for the person who took out the insurance.

Financial literacy also plays an important role. Seniors may be hesitant to utilise their housing wealth because they don’t feel confident in comparing different insurance products. Publicly-provided tools should be offered for this purpose.

Additional information:

Research Director Niku Määttänen, Research Institute of the Finnish Economy, tel. +358 41 545 6721, niku.maattanen@etla.fi

Managing Director Piia-Noora Kauppi, Finance Finland, tel. +358 20 793 4210, piia-noora.kauppi@finanssiala.fi

Esko Kivisaari, Deputy Managing Director, Finance Finland, tel +358 20 793 4220

Head of Development Kristiina Siikala, Finance Finland, tel. +358 20 793 4273, kristiina.siikala@finanssiala.fi

Conference note: Unlocking housing wealth to foster the silver economy (ETLA)

The Silver Economy Forum is co-organised by the Finnish Ministry of Social Affairs and Health, the Ministry of Finance, the Bank of Finland, Finance Finland, and the Global Coalition on Aging. It takes place in the Finlandia Hall on 9–10 July. The event is a part of Finland’s official EU presidency programme, and also marks the start of the Decade of Healthy Ageing 2020–2030 plan by the United Nations.