An annuity is not necessarily your only retirement option. You could utilise what is known as equity release, and free up some cash from the value of your home. In fact, figures just coming out from Prudential suggest that the over 65′s are sitting on a bit of a goldmine, with some £611billion of equity in their homes which could be turned into cash with equity release.
Their Equity Release Index (ERI) reveals that homeowners aged 65 and over still have a fair bit more than £611.5billion of equity in their properties, despite the falls we are seeing in house prices. They highlight the disparity between the large and significant amount of equity which people of pension age have tied up in their homes, compared to the current squeeze we are witnessing on pensioners’ incomes as reducing interest rates, and the current economic climate, take their toll on returns being seen from their investments and life savings. And, all this is having an effect on lowering annuity rates as well.
Rates on annuities and income drawdown plans have been falling, with individuals having guaranteed annuities seeing the rates fall by as much as 10% since the middle of last year. Taking this into account, Prudential reckons that this fall in pensioners’ incomes really emphasises the need for homeowners to look towards other possible sources of income, such as equity release, and, using the equity tied up in their homes could provide a valuable income especially in the current financial conditions.
Property belonging to those people aged 65 or older fell in value by about £80 billion between October last year and January this year, as the average over 65 homeowner’s property lost about £21,400 of equity. However, the Prudential equity release opportunity reflects that there is still a significant amount of equity left in all the property belonging to the over 65′s which could be utilised. Possibly quite a boost to what you might get from a pension annuity.
They state that every homeowner is being affected by reducing property prices, but it’s important to remember that very many people, especially those retired homeowners, bought their homes many years ago and have benefited somewhat from the growth we have witnessed in the housing market. Even in the current depressed market, the vast majority of retired homeowners will still have considerable wealth tied up within their properties.
In addition to this there is a recognition that many people will not want to sell up and move home, and that the current situation of falling house prices does not exactly encourage people to sell, so people could consider equity release, which, Prudential suggest, has an important role to play in providing additional retirement income, an additional retirement option, particularly when other sources of income are under pressure.
So, when you come to look at annuity quotes to find the best annuity rates for your circumstances, and you think it is not enough, might you consider equity release?
