Defaqto: Pensions deficit heightens importance of equity release

13 June 2006
Equity release is becoming a more desirable and popular solution to funding an accustomed lifestyle following retirement, according to Defaqto.

The financial research and comparison service has claimed that equity release was previously seen as a "last resort" but a new report from the company shows the market is set to grow by around £1 billion over the next two years.

People who have become accustomed to a certain way of life use equity release products to access the value contained within their lifelong property investment, a move which can also work in the favour of those with a less than satisfactory pension or retirement fund.

David Black, Defaqto's head of banking, said: "It is an unfortunate fact of life that most people will have a significant shortfall between their retirement income and their expected spending needs if they wish to retain their current lifestyle.

"The chance to tap into the equity built up in their property represents a relatively easy way to produce an additional income stream or to get a cash lump sum," he continued.

"It is likely that the use of equity release will become even more important in the future and this may eventually be by compulsion, as governments cast around for ways to supplement state pensions."

With the much publicised pensions 'black hole' becoming a more pronounced threat, equity release products could represent a more important aspect of financing later life in years to come.

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