Hot tub sales have surged during lockdown, says Peter Sharkey, as average household spending falls by more than a fifth.

During more than three months of lockdown, it’s good to know that millions of people have done their bit in a valiant attempt to keep the digital economy afloat.

Earlier this week, one retailer reported a 490pc surge in the sale of hot tubs, with the average price paid close to £2,000. Sales of outdoor projectors (for the ultimate in home cinema), barbeque pizza ovens, garden benches and outdoor lighting have also boomed as the UK appears to be preparing itself for a prolonged hot summer.

Although these figures are impressive, data published by the Office for National Statistics (ONS) puts them into context. Since lockdown began, average household spending has fallen by more than a fifth (22pc), a reduction attributed to the almost complete closure of most high streets. Instead, we’ve been buying essentials which, according to the ONS, accounted for 53pc of consumer spending between mid-March and mid-June.

Clearly, most people have been cutting their cloth according to their immediate requirements while topping-up grocery and other essential expenditure with the occasional online splurge.

Ironically, perhaps, we’re saving more than normal because we have nothing upon which to spend our hard-earned. Indeed, a large proportion of people have reported feeling felt better off during lockdown due to a sharp reduction in their spending, the scale of which currently exceeds a simultaneous contraction in income caused by layoffs and the furlough scheme.

The pivotal word here is ‘currently’.

As lockdown eases and expenditure on items other than essentials increases, a very large number of people are likely to witness a fall in income. Furloughed workers and those laid off will probably bear the brunt, but people nearing or already retired could face a significant hit.

Financially-speaking, those relying on regular dividends generated from investments for a proportion of their monthly income have been among the hardest hit by the coronavirus. To date, more than 300 listed UK companies have cancelled, reduced or suspended dividend payments to shareholders.

The biggest shock came at the end of April when oil giant Shell cut its dividend for the first time since World War II; more recently, market analysts have been suggesting that BP could soon follow suit. Meanwhile, the Bank of England reduced the base interest rate to 0.1pc, another blow for those reliant upon income from investments as the reduction exacerbated an already widespread ‘savings income drought’.

The short term impact has been muted because inflation too has tumbled; the official rate for April was just 0.8pc, but it would be foolish to believe it will remain at this level for long.

At some point, the state’s unprecedented largesse will have to be paid for, while the eventual cost of an extended bout of quantitative easing (QE), also known as ‘printing money’ will be inflation. Inflation doesn’t need to be rampant to undermine years of savings and affect future plans.

Someone with £150,000 of pension savings, achieving an annual return of 4pc and drawing an income of £10,000 per year, could expect their pension pot to last for 18 years, assuming inflation remained steady at 2pc a year. However, if inflation rose and remained steady at 3.86pc, the rate at which it stood as recently as 2011, the pension pot would last just a little over 15 years. Making good a three-year shortfall in income is difficult at any time; when you’re in your late seventies or eighties, it could be especially demanding.

For older homeowners, this nightmare scenario could be avoided.

Equity release enables homeowners aged 55 and over to release a percentage of the equity built up in their homes. Once released, the funds, which are tax-free, may be used for any purpose, including supplementing retirement finances.

Homeowners also have the option of taking either a lump sum or using a ‘drawdown’ equity release plan to withdraw smaller, regular amounts.

There are no monthly payments to make for withdrawing equity: the funds are repaid either when the owner(s) die or move into full-time residential care, usually from the property sale proceeds.

Moreover, should one spouse die or require full-time residential care, the other remains in, and retains ownership of, the family home.

Releasing equity is not a panacea, nor does it suit everyone, so before plans are made to use equity release as a means of supplementing heavily bruised retirement finances, it is important to seek advice from an equity release adviser.

Thanks again to those of you who emailed with questions regarding equity release. Please keep them coming, but note I cannot advise on the suitability of equity release to individuals. My email address is peter@moneymapp.com.

Read more about equity release: www.moneymapp.com/equity-release

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Such has been the response to our recent ‘Equity release: your questions’ feature that it has been expanded. Readers can now email Peter Sharkey (and his team of equity release experts) to ask any

equity release-related questions. Contact Peter by emailing: peter@moneymapp.com

As many readers have already discovered, there’s a wealth of information to be discovered at: https://www.moneymapp.com/equity-release. In addition, there are hundreds of blogs and articles dealing with the subject on the Moneymapp website, including Peter Sharkey’s weekly blog, rated among the UK’s very best. Read more at: https://www.moneymapp.com/blog

You may still email any queries or questions regarding equity release to: enquiries@moneymapp.com

Please note that neither Moneymapp.com or Peter Sharkey can advise readers on whether equity release is suitable for them. However, both Moneymapp.com and Peter can introduce readers to professional advisers who will explain the process and its implications for your estate and entitlement to means-tested state benefits.

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