British pensioners £17bn richer

The UK's pensioner population became almost £17 billion richer over the course to the last three months - as the value of their homes rose.

Economic Lifestyle’s latest pensioners property equity index reveals that between July and October the value of the properties lived in by pensioners rose £16.98 billion over the third quarter of 2005 - effectively adding £2,680 to the wealth of the UK's 6.3 million retired homeowners.

The largest rises were in London and the north-east - where house prices gained £8,977 and £8,384 respectively. But retired property owners in the south-west and east midlands saw £2,678 and £2,888 removed from the value of their homes.

But while the values of most homes are rising, this does not necessarily translate into more money in the bank.

"For most pensioners their property represents their most substantial financial asset. However living in a valuable house while struggling to get by on a pension does not make you feel wealthy," said Mark Neal, managing director of Economic Lifestyle.

However, there are a number of schemes available that allow older homeowners to access some or all of the equity in their home, without having to move house.

There are two main methods of releasing capital from a home, lifetime mortgages and home reversion plans.

With home reversion plans consumers sell some or all of their property to a third party. The homeowner continues to live in their property until they die or move into permanent care without having to make any payments. The percentage of the property sold reverts to the finance provider on death.

In the case of lifetime mortgages homeowners are effectively borrowing against the value of their home - with the interest payments deferred until they die or move into care and their home is sold.

Both 'equity release' schemes offer customers either a lump sum or an ongoing payment for the rest of their lives.

"As increasing numbers look to convert some of this wealth into cash through downsizing or equity release schemes, the news of an increase in property value should be welcomed," said Economic Lifestyle's Mr Neal.

"It is good news that British pensioners are some £20 billion better off than they were this time last year. They should perhaps consider how best to make use of the riches invested in their homes."