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Equity Release Can Play an Increasing Role in
Retirement Planning
By Andrew Regan With income from share-based investments in
freefall, as companies cut dividends; and energy and food costs on the rise,
some pensioners who have worked and saved all their lives are having real
trouble meeting day-to-day living costs - with their retirement planning
counting for very little. To avoid this scenario, many older homeowners
are turning to equity release to supplement their pension. By incorporating
a home reversion plan or a lifetime mortgage - the two main sources of
equity release - into their retirement planning, retirees can get easy
access to the money that's been built up in their property over the years. In a recent study, consumers were asked what
they would do to boost their income if their pension was between 25 per cent
and 50 per cent lower than they expected. The most popular option was to
sell assets, which was closely followed by taking a part-time job. The next
preferred option was to take out equity release - whether a home reversion
plan or a lifetime mortgage. Home reversion equity release plans allow you
to sell all or part of your home to a specialist provider in return for a
cash lump sum or a monthly income - and you get to live in your home until
you die or move. With a lifetime mortgage, you retain ownership of the
property and withdraw money from the value of the property, with the
lifetime mortgage provider being repaid when the house is eventually sold. These equity release study findings represent
the tip of the iceberg. Given current market conditions, we can expect to
see a significant rise in the number of people incorporating equity release
into their retirement planning and accessing capital - through home
reversion plans and lifetime mortgages - to supplement their retirement
income for a host of different reasons. The equity release study also reveals reasons
why people use home reversion or lifetime mortgage schemes - most people
would use the cash to pay for nursing home costs, whilst others choose to
help the family. But there are also some interesting differences in how men
and women would use capital raised through equity release, whether via a
home reversion or lifetime mortgage scheme. For example, men are more likely
than women to pay off debts, whilst women are more likely than men to help
the family out. In short, the study helps to illustrate how
equity release is fast becoming a key element of retirement planning for
many individuals who seek to supplement their retirement income.
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