With the pension reforms of 2015 now in full swing, annuity rates have fallen for the second year in a row1, dragging down the value of retirement savings of thousands of pensioners across the country who relied on the annuity as a form of regular income.
One of the changes in the pension reforms of 2015 made it no longer compulsory to purchase an annuity upon retirement. As such, demand for annuities has dropped and contributed to their rates in 2015 falling in value, as you can see below.
For many, this has been a serious blow. Homeowners have lost their financial stability and countless plans for their future, as annuity offers less and less each year. Never mind that once in a lifetime holiday, or fixing up the kitchen – on such rates, pensioners may struggle simply to make ends meet.
Alternative to an Annuity
The lower the value of annuity, the lower your yearly income. While an annuity is still a viable option for many retirees, 21,0002 homeowners looked to supplement their income and achieve their retirement plans by releasing some of their home’s value last year by means of equity release.
A Lifetime Mortgage is a form of equity release. It is loan that you take out against the value of your home, completely tax-free and is usually paid back on the sale of your home after you have passed away or moved into full-time care.
It is your money to spend as you wish, you may take it all as one large sum, or create a drawdown facility to draw further cash as needed. This offers many homeowners the opportunity to replenish the savings lost to falling annuity rates, providing cash to boost a regular income and the security of financial stability.
Are you worried about annuities? A Lifetime Mortgage could help.
Bear in mind that releasing equity from your home can affect your entitlement to means tested benefits and may leave less money in your inheritance.
1 – Money Facts
2 – The Equity Release Council