Equity release 'not a pension solution'

Monday, June 29th 2009

Older homeowners planning to supplement the cost of their lifestyle post-retirement have been advised that equity release may not be the best option.

Research by Friends Provident has shown that increasing longevity means 57 per cent of retirees still have living parents, meaning their financial burden may be greater than for previous generations.

However, director of Clear Water Financial Planning Duncan Carter warned that while equity release may seem an appealing solution, the long-term ramifications are considerable.

He said: "There has been a lot of reliance on property as being a multifaceted opportunity which might pay for nursing care and retirement but it can't be all of these things.

"You don't want to find that 20 years down the line your children are expecting to inherit a nice property that still has a large mortgage outstanding on it."

He added that a series of small draw downs as needed may be better than releasing a large sum to invest elsewhere, as the outstanding debt generated by equity release will generally double every ten years.