Retired people, or those approaching retirement, might have imagined leaving all of their estate to their children, but many are now turning to equity release to top up their pension incomes.
Fairinvestment.co.uk predicts that demand for equity release will increase as a result of the rising life expectancy, which has gone up by an average 20 per cent in 20 years, meaning that people will have to find money from somewhere to fund the extra years.
Sharon Bratley, chartered financial planner at Fairinvestment.co.uk, said that "The fact that life expectancy is increasing and the prospect of a longer retirement should be a cause for celebration, but many people will still worry about how they are going to afford to live during their retirement.
"Reduced income in retirement could mean that taking advantage of the equity built up in the property could become a real consideration for many." she said.
While industry trade body Safe Home Income Plans (SHIP) reported a decline in equity release business last year, this is still considerably less of a drop than that felt in the wider mortgage market.
In fact, Andrea Rozario, director general of SHIP, said that this decline is to be expected given the current economic climate, and added that "Flexible drawdown schemes continue to prove popular as older consumers seek to find ways in which to fund their retirement against a backdrop of falling savings rates and the rising cost of living."
Equity release providers Just Retirement predicted recently that equity release will increase five per cent in the next few months, as retirees come to realise that their savings and investments are not going to be as fruitful as they had once hoped.
David Cooper, marketing and distribution director at Just Retirement equity release, said: "The picture may look bleak for those whose retirement is not currently meeting their expectations but there are options for a good many people and it is important that they get the right advice to help them make the best of what they have."
Releasing equity from their home could "dramatically improve standards of living in many cases", he said, softening the blow for people who have saved all their lives but are now finding that interest rates and inflation are eating into their retirement funds.
"This is not a new phenomenon", Mr Cooper continued, "the treatment of property as an asset for use in retirement planning is gaining in acceptance, for specific uses, to supplement income, to combat the effects of inflation and provide for other needs." And, he predicts, the current situation in the economy "will simply accelerate this trend."
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