An Equity Release plan can provide a lump sum or an income to ease the gap between expected income and reality income in retirement. There is a need for education in this area as it is not the panacea for all however there are many people who would at present, and should in future change their lives in a positive manner by talking to an Equity Release professional and taking action.
Many people enter retirement with a house which is totally free of mortgage or any secured debt. They may also have an amount of Savings which for many years has been earmarked for their Retirement. One would never advocate not saving however people should also be made awarte of the very real effect inflation may have on these Savings. Interest being paid on savings is at a historic low due to the Bank of England base rate, perceived wisdom seems to assume that this record low will be in place for a further 12 months at least. The very real effect of this is twofold, firstly the interest being paid on savings is negligible and any plans which have been made by pensioners to use this interest to supplement pension income need to be revisited. Secondly the actual “buying power” of the capital is eroded by the cost of inflation. If a person has £10,000 in a savings account which pays 2%,if they add the interest to the capital at the end of the year the capital sum is £10,200, if inflation stands at 3.5%, the true value at the end of year one is £9843. This does not include the factor that the capital may need to be used to plug the income gap due to low interest rates.
It is in these circumstances that Equity Release becomes an incredibly useful tool in retirement planning. There are many prople in the UK effected in the way outlined above at present, they are sitting on a major asset, which in many cases is not being utilised. It is not unfair to say that there are pensioners who are living below what would be considered the poverty line and at the same time not utilising an asset that would increase their standard of living in a massively life enhancing way.