A growing number of pensioners are divorcing, leaving many of them financially worse off, and the recession is exacerbating this situation, equity release trade body SHIP has said.
Based on figures from the Office of National Statistics which found that the over 60s are the fastest growing age group for divorce, SHIP (Safe Home Income Plans) suggest that equity release might provide a short-term solution to divorcing during the credit crunch.
Since 1981, the overall divorce trend in the UK has reduced by 12 per cent, but amongst the over 60s, it has risen significantly, by 49 per cent,
Property prices and low numbers of house sales are making it more difficult for pensioners who are separating to sell their home and divide their wealth, or those who do sell could find they get 22.5 per cent less after the housing market crashed.
Equity release could provide an alternative option to an immediate sale of the house, SHIP says, to try and prevent divorcing pensioners from being even worse off as a result of current economic conditions.
Female pensioners suffer the most financial loss after 'pensioner divorce', SHIP has calculated, losing six per cent of their annual retirement income, which could be attributed to women having less retirement provision in place and fewer sources of additional income.
The higher cost of running a household on one retirement income also highlights the potential hardship faced by divorced pensioners, and the credit crisis has also hit incomes from savings and pensions.
SHIP predicts that a number of divorcees may not wish to sell their home during a recession, and for these couples, SHIP suggests that equity release might provide a solution which allows them to separate while avoiding further financial loss until the housing market picks up again.
An equity release plan could provide sufficient income for one half of the couple to move out and rent another property to live in, while the other remains in the property. This alternative arrangement could also allow for the family to retain ownership of the property, as the loan can be paid off at a later date.
"Clearly, 'pensioner divorce' is a pressing issue as growing numbers of older people are deciding that they would prefer to spend their retirement alone," said Andrea Rozario, director general of SHIP. "In the current uncertain financial climate, older people should consult with their financial adviser before making any large financial decisions, in order that they consider all available options and ensure the best retirement for both parties."
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