More elderly homeowners these days often find themselves ‘property rich and cash poor’. Their home is worth a lot of money thanks to the significant increase in property prices over the last few decades, but they don’t have much in the way of savings or pensions. Consequently, they are not enjoying the standard of living they expected to have in retirement.
Many clients we’ve met over the years have said “My house is my pension – I’ll just downsize.” Downsizing can sometimes be a sensible option. An elderly couple or widowed spouse can find themselves rattling around in a four-bedroomed home where they brought up their children, all of whom have since left home. For those in that position downsizing probably makes sense as much for the reduction in maintenance and energy costs and sometimes significant sums can be released. The more elderly will also often prefer to retire to a bungalow for mobility reasons. The problem though is that bungalows sell for premium prices in terms of Pounds per square foot of living space compared with houses, meaning that the funds released by downsizing might be less than would otherwise have been the case. For those living in more modest homes to start with, downsizing is unlikely to provide a sizeable sum unless ‘downsizing’ in reality means ‘down-marketing’, moving to a less desirable neighbourhood away from important networks of family, friends, and neighbours. In short, downsizing can help, but it is not an alternative to saving in a tax-advantaged pension plan.
Where your pension is insufficient and downsizing is not an option, a number of equity release plans are now available that allow you to unlock some of the equity tied up in your home without you needing to move house. You can stay near your family and friends and your favourite local pub if you still have one and you can use the money for any purpose – home improvements, the holiday of a lifetime, helping out your family, or just to make life a little bit easier. One of our clients, a lady who has been a life-long motorcyclist, used hers to buy a motor-trike so she could keep riding into her eighties. All our plans allow you to stay in your home and many have no monthly repayments to make.
There are many factors to consider, such as any effect it may have on your tax position or your entitlement to means tested benefits. Releasing equity also means that your estate will be significantly smaller upon your eventual death which means a much smaller inheritance – maybe no inheritance at all – for your children or other loved ones. There are also limits on the amount you can release.
We shall be happy to spend as much time with you as you need to help you understand the features and risks of the plans available. We shall also provide you with personalised illustrations on the different plans available. And as with every other kind of business we do, we’ll give you ‘Honest Advice in Plain English’, just as it says on our notepaper and our office signage.