Equity release: friend not foe
A recent report by equity release provider, Just Retirement, has shown many homeowners over 55 are still sceptical about releasing equity from their property. However, as more and more people approach retirement with insufficient funds, it is essential they fully understand the benefits of equity release schemes.
By 2016, over 30 per cent of the population will be over 55 and, more than likely, be starting to think about their retirement. But what should be an exciting time is being filled with fear with many worried over their lack of financial provisions. 31 per cent of over 55s are particularly worried about finding the money should any unexpected expenses arise with their current incomes only covering their basic cost of living.
17 per cent of over 55s have nothing in savings while 42 per cent are currently not saving. This then raises the question where could additional funds comes from should the need arise.
For the majority property is our largest asset. 54 per cent of 55–64 year old own their home outright - this figure jumps to 80 per cent for the over 75s – with the average property worth £236,474 so it would seem logical to make this our go-to option either by downsizing or through equity release.
For many the idea of downsizing, of selling up and leaving behind memories and neighbours, is not the most attractive of options. Equity release however allows the homeowner to release funds from their property, either in a lump sum or in smaller, regular payments just like a monthly income, whilst retaining the right to live there.
A primary concern surrounding equity release is its impact on legacy. However, as many people are finding, potentially affected family members are more concerned about their parents and grandparents having a comfortable retirement than their own future inheritance.
Equity release has come a long way in the past few years and will continue to do so as the need for additional income in retirement grows. Roger Marsden, Head of Retirement at Aviva, even argues equity release is “one of the most regulated mainstream product ranges in the UK” and a product which could be of significant benefit to many over 55s.
With a growing number of retirees struggling with their finances, equity release could provide a friendly solution they are looking for.
Content correct at time of publication