Pension Changes Could Force Homeowners to Use Equity Release
Plans to link private pensions to the Consumer Price Index (CPI) have been met with criticism and, if approved, could affect the value of the pension fund, forcing some homeowners to consider alternative income in retirement like an equity release scheme.
As the government aim to make public and private pensions consistent they plan to bring any annual increases in-line with the CPI. This could therefore make private pensions less valuable, leaving some homeowners with less than they originally planned for in retirement.
Making Up the Pension Shortfall
These plans have been met with fierce criticism from pension industry experts. The cause of their consternation is the fact that CPI has been lower than the Retail Price Index (RPI), believed to be the preferred choice for private pensions, in recent years. Therefore, many people entitled to a private pension could miss out on vital funds.
This might make an equity release scheme appealing to some homeowners eager to make up the shortfall in pension allowance.
Equity release schemes have the potential to unlock a tax-free lump sum from the value of a home to be spent on whatever the homeowner’s wish to spend it on.
Members of a forum for pension experts, Mallowstreet, have written to the Government to ask them to re-consider their decision.
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