Equity release may be one of the solutions to the pensions crisis, says a leading lawyer.
Emma Beddows, a partner in Redditch-based Kerwoods, insists it should not be ruled out when so few have a decent pension put away to live on.
A problem for equity release is its history.
Early versions ended in disaster, leaving some with debts greater than the value of the properties on which they were secured.
The resulting bad press nearly buried equity release, but it has slowly been mounting a comeback.
Ms Beddows admitted: “Equity release had a really bad reputation when launched in 90s, but now it has matured somewhat.
“For someone with no dependants it may be a valid way of enhancing lifestyle and paying the bills in later life. There is no one hard and fast rule, and it depends on personal circumstances. But it is worth considering.”
The origins of equity release were in addressing the “property rich, cash poor”.
The advantages are that it provides a cash sum or regular income to elderly homeowners when they need it while allowing them to remain in their house. Money released can be used in all sorts of ways – gifts to children and grandchildren, paying down debt or funding adaptions to the home such as stairlifts.
The disadvantages are that there may not be much left to hand down to the family on death, though a side benefit is a possible reduction in inheritance tax liability.
Interest is charged on a compound rate, meaning it increases daily and homeowners borrowing just £45,000 over 25 years end up paying just over £150,000. There are charges involved in setting up equity release schemes, any benefits you receive will probably be lost and falling into negative equity remains a danger.
Ms Beddows said: “For those with family it is often a more complex decision.
“But for someone with no dependants it is a means of spending money to provide a higher standard of living in their lifetime.
“Take your time, refuse to be rushed, and consult your advisor, all the time bearing in mind that average life expectancy at state retirement age means the typical pensioner will live for another 20 years or so.”