By 2026 there will be two million more pensioners than children, although this is good news overall, and we are looking forward to living longer, it does put an added financial strain on many.
Due to the costs of raising a family, constant drains on disposable income coupled with other outside pressures like low wage rises, retirement planning can be difficult and in many cases, it is put on the ‘back burner’ until such an age when it is no longer possible to build a large enough retirement fund. There are many people who find themselves in a situation where they are ‘asset rich and cash poor’.
People are realising that their retirement pot is simply not enough for their retirement needs. However, the future isn’t always as bleak as it first looks, you may find yourself with a house that has increased in value over the years so that you now have a large amount of equity locked away in the ‘bricks and mortar’ and on a day to day basis you are struggling with a small retirement income. You may be missing out on the retirement you had dreamed of holidays, weekend breaks and enjoying the pass times you never had time to enjoy when you were working.
What to consider?
Equity Release products suffered some bad publicity in the 1980’s and 90’s. This was primarily due to borrowers experiencing negative equity, due to rising interest rates and other economic factors that made the poorly designed products a disaster. This form of financial planning has now come of age due to superior products offered by big household institutions giving guarantees against the past issues. With the right advice, Equity Release could assist you in having the retirement you desire. The Government are seeing the benefits of Equity Release in ‘bridging the income gap’ and are actively working with the Society of Later Life Advisers to have a greater understanding of this benefit.
However, Equity Release can be difficult and complicated to set up in terms of the legal aspects of property ownership (title) and additional expenses can be incurred, including valuation fees and financial adviser fees.
Equity release is not suitable for everyone. The advantages and disadvantages need to be carefully explained. Interested parties require specialist advice to see if the product is suitable to their needs, other alternative areas need exploring first and will only proceed when a Qualified and Specialist Adviser is happy that this is in the clients best interest. The advice and product is tailored to a client’s specific needs and wishes.
Reasons people turn to enquiry release
- As an alternative retirement fund
- To supplement and top up existing retirement funds
- To take out ad-hoc lump sums, for capital expenses such as a new car, a holiday, or an extension on the home
- Inheritance tax planning, by way of extracting capital from the estate for spending and other areas of IHT planning
- Ensure that you arrange your enquiry release with the right people
- Equity Release products are regulated by the Financial Services Authority (FSA) and are covered by the Mortgage and Home Finance Code of Conduct rules (MCOB). All reputable companies and individuals involved in the Equity Release process should be members of the Equity Release Council (ERC), who oversee that advice is underlined with a strict set of principles, they act within a Code of Conduct that ensures the advice process is strictly followed.
- Each member of the ERC is signed up to a Code of Conduct which puts in place a number of safeguards and guarantees for you, the consumer. This means that if you are using Equity Release products offered by ERC members, you can have confidence in the products they use and the information they receive. On top of this all members must abide by the overarching principles of the Council.
- Some members of the Council are also accredited members of the Society of Later Life Advisers (SOLLA). Part of the accreditation process for SOLLA members is that they hold the Equity Release qualification.
Things to consider
- Interest is charged on the capital released and rolled up each month until death or settlement of the agreement
- Ensure that you arrange your Equity Release with a reputable provider such as Aviva, Legal & General and other specialist organisations who are members of the Equity Release Council
- Make sure that there is a guarantee in place that your property will never go into negative equity
- Look for the best deal on interest rates and other associated issues
- Shop around for the best fees from your legal representative and financial planner
- Opportunities to reduce Inheritance Tax can be made available with professional financial planning
- Equity Release is available in later ages however the older you are the more capital can be released
- It can be difficult to find reputable and experienced solicitors to carry out the specialist work on equity release. ‘Equilaw’ is a specialist team of solicitors who are experienced in guiding people through the process, with updates throughout.
- Allied Financial Services are now enrolled with the Equity Release Council and can help with any Equity Release queries. We also have a fully accredited member of the Society of Later Life Advisers (SOLLA).
