Finance

Pressures are growing on our millions of retired pensioners. They rely financially on their savings and investments to see them through their retirement. With each interest rate cut from the Bank of England they see their income decrease.

Pension schemes have lost valuerecently in the stock market fall thus decreasing their value on drawdown. This will leave people nearing retirement with a gap in their retirement funds and seeking another stream of income.

Financial security in retirement isn’t as certain as once thought. The escalating prices of utilies and groceries, coupled with the falling values of share based investments is making it more difficult for pensioners to meet their daily living costs. Having saved all their lives towards their pension fund, the comfortable lifestyle they were expecting is out of reach.

Lifetime or Reversionary Mortgages can release money tied up in homes. Before taking this path you should thoughly research the products available and it’s strongly advised that you seek advice from an Independant Financial Advisor as they don’t meet everyones needs.

Equity Release Mortgage providers determine the amount you can borrow via variables such are age, health and property value. There are a number of products available but most of them allow borrowing of around 35%-55%. If you are on means tested care funding or benefits check to see if your eligibility will be affected.

A negative equity guarantee is always a good idea with Equity release. This means even if the value of the house drops significantly you will never owe more than your house is worth. Use a lender who is a member of SHIP (Safe Home Income Providers) and well known or recommended.

When considering Equity Release Mortgages make sure you are aware of all the charges involved and check for early redemption penalties should you wish to exit the product as you never know when your circumstances will change.

Sale and Rent Back schemes are sometimes confused with Equity Release. They are completely different and the former is not regulated by the Financial Services Authority.

You should always obtain independent legal advice before proceeding. Equity release can be intricate. Make sure you have all the facts at hand to ensure you make an informed decision.

In summary Equity Release Schemes are a good idea and can work well. However you must do research and I suggest you find a qualified advisor specialising in this market. All up to date facts are essential.

Given the current market conditions, we would expect to see a healthy rise in the number of people incorporating equity release into their retirement planning.