Equity release could fill the void left in pensioners’ income since base rate cuts
According to SHIP (Safe Home Income Plans) the six base rate cuts in as many months have left a 25% deficit in pensioners’ incomes, and the answer for many pensioners could be to fill the void by using an equity release plan.
Pensioners can supplement their income by using equity release
The UK is home to more than 8 million pensioners, all of which have seen interest rates hit a historic low, resulting in their monthly incomes dropping by an average of 25% in the last 12 months. The answer for many pensioners could be equity release, which would help them supplement their income and help fill this 25% void.
The equity release trade body SHIP has calculated that around 80% of the UKs pensioners rely on their savings or share-based investments to generate day-to-day income, so the recent cuts in interest rates have had a dramatic effect on their income.
This time last year pensioners’ savings on a base rate tracker account were generating an income of £158 a month - this would have accounted for almost 29% of their income. Interest rates have since fallen from 5% in September 2008 to just 0.5% in March, meaning for the month of April a pensioner would be now earning just £16 a month from their saving – which accounts for just 4% of their income!
Pensioners should use equity release to unlock the capital from their home
SHIP have forewarned pensioners that it is unlikely that interest rates will regain the peak levels of 5.75% as experienced in the summer of 2008. Instead pensioners should start to seriously consider other ways of supplementing their income, and fill the void by using equity release to unlock some of the capital from their home.
Director General of SHIP explains income solution of equity release
The Director General of SHIP, Andrea Rozario, commented: “many pensioners have saved their whole lives with the expectation that they can use income from this capital and the state pension to fund a comfortable retirement. However, with the unprecedented movements of the UK base rate, thousands of pensioners are now contemplating how they will survive without up to a third of their income,” explains.
“One solution for those pensioners needing to boost their income is equity release. The over 60’s can release some of the wealth tied up in their property and increase their retirement income substantially should they wish. We urge the Government to work with us in promoting this as a very real alternative for pensioners who are suffering as a result of the credit crisis.”
Find out more information on equity release and see how it may benefit you during your retirement years from the equity release advisors at Age Partnership.
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