State-Supported Equity Release Scheme Could Improve the UKs Care Funding System
Respected body, The Joseph Rowntree Foundation (JRF), suggested in a report published last month that by 2050 the spending on long-term care for the elderly will need to increase fourfold as there will be twice as many people aged over 85 as there are today.
In the report, entitled ‘Options for Care Funding: What could be done now?’, the author stated: “Everyone, including the Government, agrees that the UK needs a new long-term care system but it may be a decade before a new system is in place. These reforms (i.e. those outlined in the JRF report) could quickly make a difference to older people and their carers struggling to cope under the present system.”
The proposed interim system solutions include in its centre a state-supported equity release scheme. The aim is to give those homeowners with a lower disposable income the option to pay for home-based care, by deferring costs until their home is sold.
A state-supported equity release scheme would be similar to the student loan system – allowing repayment at a later date. This enables the elderly who have a lower disposable income, but who are asset rich to tap into that wealth and release equity from their home.
Equity Release Schemes
For many pensioners an equity release scheme provides a welcome way of releasing equity for their home, giving them disposable income to fund caring and arrange home help.
For some pensioners equity release will not be the answer to their care funding problem: If the value of their home is low they can find the scheme a bit expensive as fixed legal costs and the underwriting costs do not change depending on the value; There is also a minimum drawdown amount, so some people might not actually want to release that much equity.
Equity release providers have already provided many suggestions that can help overcome these problems, so all pensioners can release equity and fund their care.
Suggestions range from: the Government provides tax relief when a person can demonstrate that the money raised from a property means they will not ask for funds from the state; to a US styled plan, whereby the Government pays for some of the fixed costs of equity release, thereby allowing those pensioners with lower value home can afford to use them.
The debate continues, but all parties agree something must be done. With a state-supported equity release scheme nowhere near to fruition it may well be worth you assessing the option of equity release now.
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