How Equity Release Can Help Your Retirement

Equity Release Can Help Your Retirement

Having a comfortable retirement is something that everyone desires but few may actually achieve. In the last few decades, successive governments have realised that many people will not be able to realise a comfortable retirement because:

  1. People are living a lot longer and are having leading active lives in their retirement;
  2. Relatively small amounts are being saved by people in their pensions for retirement. The average pension pot is around £40,000.

This has led the Government to introduce Automatic Enrolment which is a system that makes employers and employees contribute to a pension.   The idea behind this is to make people aware of providing for their retirement and to reduce people’s reliance on the state to provide for them in old age.

Currently, the old age pension is provided to retirees on a ‘Pay As You Go’ basis which means that it is funded by working people who contribute through National Insurance Contributions. As the demographics of the UK population shift from more people in work to less people in work and more people retired, there is no guarantee that the state will be able to provide a pension for all its pensioners.

Equity Release In Retirement

With pension savings still at a low level and people’s life expectancy increasing, there are few options available to people to fund their retirement. This is one of the reasons why equity release has risen in popularity over the past few years.

Many people have houses that are worth a considerable amount of money and which have little or no mortgage. These tend to be their biggest assets yet they are unable to release the money from them.

Using one of the popular equity release plans such as a lifetime mortgage or home reversion plan, people who are seeking to provide income or a cash lump sum can use their house. The main advantage with using an equity release product is that they do not have to move out of their house – this would be the case if they work to down size.

The amount of money that can be raised through an equity release plan is primarily dependent on two factors: the age of the people applying for the scheme and the value of their property. Where age is concerned, it is possible for two people to take out an equity release scheme and it will be the age of the younger of the two people that will apply.

Equity Release Schemes

The two most popular equity release schemes are a lifetime mortgage or a home reversion plan. For both of these schemes are regulated by the UK Financial Conduct Authority (FCA) and, therefore, representatives who are involved with advising these products have to be suitably qualified and authorised. This is an important thing to remember if you are considering any kind of equity release product – you must check to ensure that your adviser has the right qualifications in order to provide you with the appropriate advice.