As pension funds prove insufficient, more seek out equity release
The Pensions Policy Institute released a report on retirement income today, suggesting that pensions may be insufficient to achieve the quality of life that pensioners desire or require.
The PPI research director, Chris Curry, had this to say
“Many median earners who contribute to DC [defined contribution] pensions at average levels of 10 per cent of salary are unlikely to have sufficient state and private pension income to achieve a desired standard of living in retirement.”
As many equity release experts have been saying in recent years, traditional retirement financing faces many challenges. However, UK pensioners can remain very optimistic in rising to the challenge. Many are sitting on large amounts of equity in their homes. A change in perspective can often find new ways to meet the demands of modern life. Equity Release can now be seen as a first-choice tool in financial planning.
Use our equity release calculator to compare rough estimates of the amounts offered by the major equity release providers. Or for a more detailed and personalised comparison, call 0800 524 4839 for a free, no-obligation chat about equity release.
Why do equity release providers offer different amounts?
One of the main questions that someone thinking about equity release may have is:
“How much can equity can I take out of my home?”
The amounts that the different equity release providers can offer you does depend on a wide variety of factors. These factors can usually be split up into two seperate groups - Homeowner Characteristics and Plan Characteristics.
The homeowner characteristics that usually affect how much you can release are the age of the homeowner and the value of their property.
The Plan Characteristics that usually determine the equity release amount are whether its a drawdown plan or a lump sum plan (the drawdown plan giving you the option to have a reserve on which to draw and the lump sum plan giving you all the cash at once). The interest rate can also determine which plan allows you to release the most.
Use our equity release calculator to compare rough estimates of the amounts offered by the major equity release providers. Or for a more detailed and personalised comparison, call 0800 524 4853 for a free, no-obligation chat about equity release.
Prudential Withdraw From Equity Release Market
It was announced yesterday that Prudential are pulling out of the equity release market come the beginning of next year. Whilst this may come as a shock to those who see the exponential growth of equity release happening as we speak, it is tempered by the fact that it seems to be a corporate operations decision rather than one to do with the market itself.
A lack of access to the appropriate funding required by the equity release market was cited as a potential reason by the Financial Times.
The Director General of Safe Home Income Plans had the following to say:
“In the current economy finding sufficient funding is an issue that many organisations face and this shows that equity release is not immune to these issues.”
Prudential have announced that the terms and conditions for all their existing customers will be honoured, it is just new business that they are stopping.
Aviva and Just Retirement, two of the three major equity release providers, have come out and declared that are very much still in the equity release business and are excited by the equity release market.
For more info read http://www.ft.com/cms/s/2/3614480a-d8f0-11de-99ce-00144feabdc0.html
Who are the Best Equity Release Candidates?
The question, who are the best equity release candidates, is a difficult one to answer because there are so many reasons to want to take out an equity release plan. What was usually associated with cruise holidays and buying an extra car, is now associated with everything:
Helping family out through hard times
Renovating the house
Upgrading the car
Buying second homes nearer family
Taking trips to see loved ones
Paying off debts and mortgages
Or simply supplementing household income so meeting the bills is not a chore every month.
Whatever the reason, the best equity release candidates have some idea about what they need the money for.
If you are thinking about equity release, why not call up for a free, no-obligation chat on 0800 524 4853
Head of Pensions Policy Institute Predicts Equity Release Growth
In an address based at a seminar by the Pensions Policy Institute, Niki Cleal predicted that equity release was to grow significantly once more retirees were aware of the potential of unlocking the equity in their homes.
The idea was that whilst there remains a very large of equity tied up in the properties of over 55s, many were simply not aware of planning tools like equity release.
Ms Cleal stated:
“Income released from housing wealth can often complement other forms of income in retirement.”
As other, more traditional, methods of retirement finance have become more unstable, the demand is expected to increase. It might be that the ‘other forms of income retirement’ that Ms Cleal talks about are the ones that complement equity release, rather than the other way around.
If the current growth trend continues, it is expected that over 80% of retirees will shortly be owner-occupiers of homes, allowing for a much greater chance for more people to release equity from their homes.
It seems that recently, equity release is starting to catch people’s attention and it is being talked of more and more as a potentially integral part of retirement planning.
If you are thinking about using equity release to help fund your retirement, why not call up on 0800 524 4853 and find out what the latest interest rates are, how they apply to you and which plans you may be eligible for.
Alternatively click here to use our equity release calculator to find out whether you are eligible for the safest equity release plans.
“How do I release equity from my home?”
One of the often asked questions for those ‘house rich, cash poor’ people is “How do I release equity from my home?”
It is not quite as complicated as you might think.
There are quite simple and straightforward steps you need to take if you are looking for equity release.
First and foremost, you need to find out whether you are likely to be eligible for the equity release plans. This can be done using our equity release eligibility calculator found here.
If you are eligible for equity release, it is important to find out what interest rates apply to you and how much equity you would be able to release. Not to worry, our calculator found above will help you on your way with this.
Now that you have all the facts and figures, you can then make an informed decision about whether to carry on with the process. A little professional help would certainly be of use to you now. Again the calculator will help you with this too.
If you decide to go ahead, the professional help you receive from Independent Financial Advisers will enable you to search the market to find the plan that is just right for you.
Then comes the house valuations, and finally the completion - with the help of solicitor’s of your choice.
Alternatively, call 0800 524 4853 for a personalised helping hand.
Lord Myners view on equity release
This news blog has written before on Baroness Hollis’ pro-active stance on the uptake of the equity release market - a real tool in retirement planning. Further to the discussion, Lord Myners - the Treasury Minister - has further backed Baroness Hollis’ approach. Lord Myners claims that for those whose position typifies ‘house-rich, cash-poor’, equity release may well be an integral part of the strategy they use to finance their retirement years.
Lord Myners also went on to congratulate the equity release industry’s stance on self-regulation, notably SHIP equity release, stating that they have “developed a highly commendable code of practice” and stated that the Government should encourage the use of well-regulated equity release schemes.
Market Trend: House prices continue to rise
Ever since February 2009, house prices in the UK have continued to rise. Many experts claim the demand for houses has far exceeded supply, leading to month-on-month growth - with August’s growth level said to be 1.6%. Nationwide claim there has been growth of 3.2% since the start of the year - with growth expected to continue long into the new year.
A property worth £300,000 at the start of the year would now be worth £309,600. If the current monthly trend continued one would expect that property to be worth £335,173 by December. Not only does this allow homeowners to release more equity from their property - it also opens up equity release as an option for those with larger mortgages that they would like to clear from their property - an ever increasing trend given that equity release requires no monthly repayments.
Using equity release to put an end to mortgage repayments
Equity release, whilst in its infancy, had the misconception that it was to be used only for funding the finer things in retirement. Of course, this remains true today - retired homeowners are taking full advantage and reaping the rewards of the vast sums of equity that they have built up over the years. However, this particular scenario depicts far less than the whole picture.
As mentioned before in this news section, the growing trend is for retired homeowners to use equity release to help their family both through difficult times and positive times, such as buying a first home.
Little mention has been made, however, of the significant proportion who are releasing equity in order to clear their mortgage to liberate themselves from the stifling nature of monthly repayments. A mortgage is usually one’s biggest monthly outgoing whilst taking out an equity release plan doesn’t incur any monthly repayments at all. Those who use equity release for these everyday purposes and bills may find they have much more money of their own to enjoy the retirement they have earned.
The changing demographics of the UK
Many experts predict that the demographic make-up of the UK is changing quite considerably. The UK’s population is enjoying a greater life expectancy than ever before. Many different figures have been quoted but the average estimate is that the number of over-65s will increase to represent 21% of the population, some 15.1million by 2029.
For the equity release market, this has obvious ramifications. But what about the indirect ramifications?
The sharp and sudden decrease in trend for final salary pensions, along with the Bank of England’s fear that the recession will last longer than first thought, the reliability of pension funds and other investment vehicles will come into question.
The trend for equity release has been steadily upwards, regulations have become more stringent and SHIP now accounts for around 90% of equity release providers. As mentioned in this news blog before, certain members of the House of Lords are calling for equity release to be government backed as a serious retirement-finance option. This all points to equity release possibly being accepted as the answer to the problems caused by the recession. There are risks involved with equity release, as there are with other retirement plans and investments. It is about the individual getting unbiased, professional advice and then weighing up their options taking all possibilities into the balance.