Death of the pension: enter equity release

(TFA) -- If you’re a homeowner over the age of 55, then you could unlock tax-free cash tied up in your property and use it how you wish in order to enjoy your retirement.

A perfect storm of record low annuity rates, life expectancy on the increase and inflation from the government’s money printing exercises is slowing killing the value of pensions. The retired population of the UK is in need of an alternative and it seems equity release is taking on this role.

Whilst pension rates are at an all time low, chances are your property has increased in value. According to the Nationwide House Price Index, house price growth has averaged nearly 590% in the last thirty years. Equity release allows you to get cash from this value without you having to move, downsize or sell your property.

Research is the first step in understanding your options, so look to use a good equity release calculator to see if you are eligible and how much you are able to release before you make any decisions.

Thousands of Britons are finding themselves in pension poverty through no fault of their own, having saved for a pension throughout working life only for the value to be destroyed. In 1995, a pension could have bought an income for life of £11,380 per year whereas the same pension now would get just £4,920 per year. It’s no wonder why analysis from a major pension provider has revealed that someone retiring can expect their income to fall by nearly 39%.

Whilst pensions have been falling, equity release has become more regulated and flexible than ever. Consumer protection features are at the heart of the industry. You retain the right to remain in your property for life as well as retain 100% home ownership. Interest rates are fixed for life so you know exactly what the charges will be and rates are currently between 5.5%-6.5%. You are free to move and take the plan with you to the new property. Alternatively, if you decide to sell you are able to pay off the plan.

With a Protected Equity plan you are able to ring fence a set portion of your property, so you know you will never use up more than that fixed amount. This plan is perfect for those wanting to leave a set inheritance to their family and gives the best of both worlds. A Drawdown plan allows you to draw the money as and when you need it, providing the flexibility that you are not taking more than you need and giving you the peace of mind that you have a fund to draw upon if a need arises.

Aside from poor pension performance, another factor driving the growth of equity release is the desire to give family an early inheritance. The benefits of this is that you get to see your inheritance in action and help the family when they need it most; university fees, weddings, property deposits, business investment and school fees. All of the bigger family needs happen typically at a younger age, where waiting for an inheritance just doesn’t cut it.

We recommend going to Which Equity Release™ to see how much you can raise and what the costs might be.

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