Historically, Equity Release has been seen as the final choice for those requiring extra cash in retirement, only considering this when all other options, including downsizing or using existing savings have been exhausted.
We appear to have an interesting attitude to the role that property ownership has, often ignoring that apart from providing a place to live, any tax free (well it is at the moment!!!) increase to its value hasn’t been earnt as it’s often come about through luck or location so why shouldn’t we seriously consider property ownership as an important part of our retirement planning.
We have been hearing a great deal recently about the changes to pension rules, retirees being able to access all of their pension funds to spend how they like rather than having to follow the traditional route of purchasing an annuity and there’s the new state pension coming in April 2016. Unfortunate-ly there’s already considerable confusion as to what we’re actually going to receive, realising now that for those who interrupted their national insurance contributions through perhaps self-employment or by opting out of Serps they may not be entitled to the full basic amount.
It appears to me that like most changes, there will be winners and losers and if figures we see in the trade press are correct and that retirees require an annual income of £13000, are their pension pots realistically going to provide this amount of income? Currently the figures would suggest not.
Sadly over the last decade or so we have seen the demise of the final salary pension scheme and for those fortunate to still be contributing members, for some, the benefits they will receive on retirement have been reduced when compared to their predecessors. I recently spoke to a former high street bank manager who retired in his 50s on a final salary pension who informed me that he pays more in tax on this pension than he receives from his full state pension…an enviable position to be in but one which for the majority of clients I see will never be attained.
So isn’t it time for us to see our homes and the increased value to them as a real option to providing this additional income, especially through a sensible use of using the draw-down option that so many lenders now offer?