Equity release could plug gap left by increasing state pension age

21 October 2009 / by Rachael Stiles

In response to concerns that a higher state pension age will leave many pensioners struggling financially, Key Retirement Solutions has suggested that equity release could plug the gap.

This week saw Brendan Barber, general secretary of the Trades Union Congress (TUC), criticised plans to increase the state pension age to 70, laid out in a report on retirement from the Institute of Directors.

"The better off you are, the longer you live and the more years you get to claim a state pension. A big rise in the state pension age would mean the less well-off lose a much bigger proportion of their pension than longer-living affluent pensioners, who are much less dependent on the state pension in any case," he said.

"With employers fighting hard to keep a retirement age of 65, such a proposal would condemn many older people to a limbo where they are too old to work and too young for a state pension.

"Taking from the poor to give to the rich is no way to reform the pensions system," he stressed.

Both the Labour and Conservative governments have recently proposed that they will increase the state pension age for men and women to 66 in the future, so retirees stand to suffer whichever party comes out on top in next year's election.

Increasing the age at which people are eligible to claim a state pension is likely to contribute to financial hardship in some retiree's households, Key Retirement Solutions said, but such "income shortfalls can be alleviated by generating a regular income through an equity release plan."

Equity release enables homeowners to unlock some or all of the value in their property, either as a lump sum or a regular income, to be used for any purpose they wish.

© Fair Investment Company Ltd

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