Would winter fuel allowance cuts see more retirees turn to equity release?
With suggestions to means test the winter fuel allowance proposed by former care minister, Paul Burstow MP, retirees may have to turn to alternative funding such as equity release just to pay their fuel bills.
The cost of energy bills are a constant worry to the majority of households, both young and old. The average household currently pays £1352 a year in energy bills, a 23 per cent increase on January 2011. It is now predicted that nine million homes will enter into fuel poverty within the next three years.
In direct contrast to energy bills, pension annuity rates have continued in the opposite direction; the average income from a £100,000 pension pot is now £4920, down from £11,380 in January 1995 and £7000 in January 2008.
This would mean, without a winter fuel allowance, an average retired couple could be using nearly 14 per cent of their income on energy bills alone.
Equity releaseM allows a homeowner to release funds from their home whilst retaining the right to live there. Over the past few years, as annuity rates declined and savings depleted, the number of people turning to equity release has risen dramatically; it is expected that the total funds released in 2012 will surpass £1bn, up £40.4m on the previous year.
At present, home improvements, repaying debts and taking holidays are the three top reasons behind equity release. However with energy bills and annuity rates continuing to head in completely opposite directions, it is increasingly likely that equity release may be needed to simply fund our basic standards of living.
Content correct at time of publication