Pensioners warned equity release must be last resort

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by Kay Murchie

Consumer group, Which?, is warning those considering equity release should do so as a last resort.

Equity release, which is a scheme designed to allow homeowners to release cash from the value of their property, can provide pensioners with a lump sum from their property without having to move.

However, the consumer group believes that the schemes are sometimes expensive, inflexible and leave people with little equity.

Furthermore, Which? adds that cash released from a property could also affect the level of means-tested benefits which they were entitled to.

Over the last few years, equity release has grown in popularity particularly among pensioners as a retirement solution. The decade-long property boom has meant that many pensioners have been sitting on large amounts of property cash.

Philip Spiers, co-author of Which? guide Care Options in Retirement, said while equity release might seem ideal to pensioners struggling with rising food and fuel costs, they need to be aware that circumstances can change and leave people without enough money remaining to fund alternative accommodation, as well with affecting entitlements to benefits.

Mr Spiers advises that those considering equity release should do so cautiously and seek professional advice. He also recommends exploring other options and equity release should be a last resort.

One option could be downsizing to a smaller and cheaper property, or another option could be to use existing savings, or even borrow from family who can be paid back when the property is eventually sold.

Which? also advises those struggling with finances should investigate their eligibility for state benefits or grants to help with the cost of living.