“Equity Release – Life Raft or Scandal?”

For a long time now I have been advocating that older people will have to use the value built up in the house to secure themselves a better lifestyle in later life.   There is around £1 trillion locked up in housing wealth, which has accumulated as property prices have risen ahead of inflation over the last half century.   For many parents this was and still is seen as a legacy to leave to their children.

However, circumstances have changed significantly in the last fifty years :-

  • People are living much longer;
  • Their children are no longer children;
  • The new legacy beneficiaries are more like to be grandchildren – to pay for their education or give them a deposit for a house of their own.

However, other things have changed too :-

  • Because Grannie and Grandpa are living longer they may well need care in later life;
  • The Government cuts and poor quality elderly care in the NHS has removed the state funded safety net;
  • The taxman has gradually capped the value of large legacies with Inheritance Tax.

So retirement for homeowners is a time to review their assets and consider what financial options they have to support an extended later life.

Most people would like to stay were they are – certainly while their health is good.   In any event there are very few good alternatives, especially if they want to remain in their local area.

For some their “idealised” solution is a move to a bungalow, which gives them less space to look after and should release some money to supplement their pension.   This turns a blind eye to the prospect of their becoming frail, because it is virtually impossible to insure for that at reasonable cost.   So they hope it will never happen to them.

Most elderly people will develop some chronic health condition in later life, though luckily for the majority it will still allow them to live an independent life.  In the over 80 age group, one in five are likely to develop dementia, which brings problems for the carer as well as the sufferer.

So putting care to the back of their mind is the only easy short-term option.

Is there a life raft?

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