Is equity release an option for those who cannot afford to retire due to pensions crisis?
04/02/2011
Equity release could be an option for those with small pensions as it can provide homeowners with a tax-free lump sum.
Anyone aged over 55 who owns their home can apply for equity release, which enables people to take advantage of the equity in their property.
This can be paid as a tax-free lump sum or provide an income for life, which may help those with only small amounts saved in their pensions pot.
To find out if you are eligible for equity release and to discover how much you could get, it may be worth using a price comparison site such as Money Expert.
That is because consumers are able to fill in how much their house is worth and how much they would like to release into one page.
The site will also list the best plans for the individual based on these factors.
Advantages to equity release:
• You can use the money for whatever you like.
• It guarantees an income for life.
• You will still own 100 per cent of your property.
• Tax-free cash can be released as a lump sum.
Risks of equity release:
• It is a lifetime mortgage so you will not be able to move.
• It is a high-risk product so advice should be sought before choosing this option.
• A home can be repossessed if the mortgage repayments are not met.
This could be an option for those who are still working as they cannot afford to live on their pension.
According to thisismoney.co.uk, one in eight men aged over 65 cannot afford to retire on their current pensions and still need to work, figures from the Office of National Statistics have shown.
Around 60 per cent of men working past 65-years-old are in part-time work as they have no pension or savings and have debt to pay off.
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