Equity release 'must be last resort'

Friday, 19 September 2008 08:02

Pensioners turning to property to fund retirement are being urged to use equity release as a last resort.

Equity release has grown in popularity over recent years becoming a more mainstream retirement solution - as rises in property values saw many pensioners sitting on large amounts of property cash.

However, Which? is warning equity release products can still be expensive, inflexible and leave people with little or no equity in their home, so limiting their choices later in life.

Pensioners are also warned any money released from schemes could also affect the amount of means tested benefits they are entitled to.

Philip Spiers, co-author of Which? guide Care Options in Retirement, said: "Equity release might seem like the solution for any pensioners struggling to make ends meet this winter. These schemes provide income while enabling you to stay in your own home."

However, he warned circumstances can change and leave people without enough money remaining to fund alternative accommodation, along with hitting entitlements to benefits.

"Anyone considering equity release should do so cautiously - and only after exhausting other options. In all cases, independent, professional advice should always be sought."

Before turning to equity release, Mr Spiers advises people to first consider downsizing to a cheaper property, use existing savings, or even borrow from family who can be paid back when the property is eventually sold.

People struggling with finances should also check their eligibility for state benefits or grants to assist with the cost of living.

Which? also warns that while all Safe Home Income Plan (SHIP) approved equity release schemes allow the plan to be transferred to a new property, few lenders consider sheltered housing or retirement homes to fit their criteria.

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