Equity Release Rescues Pension Prisoners

George Osborne's latest budget has made things more difficult when it comes to the way pensioners draw their pension. Times are getting tougher for pensioners and we wonder if Mr Osborne has missed the point entirely. But it's not all doom and gloom, equity release could be the future.

In his latest budget, George Osborne, the Chancellor of the Exchequer, made some radical changes to the way people draw their pension. You will no longer be hit by a penal 55% tax if you decide to take your pension as a lump sum instead of buying an annuity – an income for life. 

While there has been much talk of retirees heading to the showroom to buy a Lamborghini with their pension pot in a wave of frivolous irresponsibility, the reality is wildly different. The Chancellor has missed the point completely: it doesn’t matter when or how you draw your pension, it still isn’t enough for most to live the retirement they had hoped for.

On average, your income drops by 40% when you retire. What is unfortunate about this statistic is people have more free time in which to pursue their interests yet their income doesn’t match up. 

At a time when income has nearly halved, you now have the time for:
  • Spending more time with and treating family
  • Crossing those must-see places off the list 
  • Undertaking those long-awaited home improvement projects
  • Taking up hobbies

Property vs Pension

It is no wonder that the equity release market grew by 36% this year, as more people look to their property, not their pension, to fund their retirement ambitions. Property prices have increased by 500.25% in the last 30 years, turning your property from a place to call home into a fast growing asset. Usually you would have to sell up and move to take advantage of this growth. With equity release, you continue to own your home, are able to live in it and can access some of the equity that has been building up over the years.

The changing face of equity release means it is more a family decision than ever, with over a quarter of the money drawn being spent on the family. With life expectancy averaging 81 years old, the traditional concept of inheritance needs a rethink as any money you are lucky enough to be passed on will likely come in your 50s and 60s - an age when you are arguably your most financially comfortable. Using equity release to gift family members allows you to decide when you leave an inheritance. Perhaps there is a big life event coming up for a family member that could use a financial boost, such as weddings, education fees, property deposits or business investments.

The huge upside to doing it this way is you get to see your inheritance in action. It’s not all being given away though, as half those releasing equity do so for home improvements and 1 in 3 use it to realise their travel plans now that they have the free time. 

Another 40% clear a lingering mortgage. Those that do, enter retirement without mortgage repayments to worry about and with freed up monthly income to spend more enjoyably. Like any other financial product, it is important to get the right information and advice. That’s why Reader’s Digest recommends reading the Reader’s Digest Guide To Equity Release 

You can order your guide AND find out how much you can release using the calculator above.

The calculator will look at your property value, age and address to work out:

  • How much you will be able to release
  • What it will cost you to do so
  • What your future house price may be
  • What impact taking money from your property now will have on your estate

You can also contact us on 0800 029 1233 to discuss your needs with a view to arranging a no obligation face-to-face home visit with one of our financial advisers.

The Flexible Lifetime Mortgage is by leading insurer Aviva and is only available through qualified financial advisers such as those working with the Reader’s Digest Equity Release Service.

*(Equity Release Council Lending Figures Q3 2010 – Q3 2015)

A Lifetime Mortgage may impact the value of your estate and could affect your entitlement to means-tested benefits. Think carefully before securing other debts against your home. To understand the features and risks ask for a personalised illustration. Reader's Digest Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,490. Our adviser will talk through the setting up costs of a Lifetime Mortgage before you make any decision to proceed.

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