SAGE Personal Finance researched retirement and equity in homes. Investigating people’s approach to retirement planning, SAGA found that 40% discovered their pension fund was not as big as they had hoped. A third of those questioned had not planned at all for retirement and were therefore in need of advice once retired.
SAGA suggests that a solution for this pension poverty is to release the equity in your home. However, nearly a fifth of adults asked believed their children were relying on future inheritances from them. Therefore, over half of pensioners claimed they would feel guilty if they did not leave a legacy. As most people only have assets to leave to children in a property, this makes releasing equity feel a potentially selfish option.
Having assets as a pensioner can leave you cash poor. You appear wealthy, as you have a debt-free property. However, cash flow is limited. SAGA also reports that one in fourteen pensioners are still paying off the mortgage, even more are paying for a car, while others hold loans for children or themselves.
Therefore, many of those in retirement face a dilemma. There are funds tied up in the house that could be released. This would help those struggling in retirement to achieve a lifestyle they may have desired as they worked. However, children would be left without a helping hand at a time when they may need support.
Speaking to a financial advisor is essential when looking for a scheme that may provide a regular tax-free payment from the equity in your home. There are schemes available that only require repayment in the event of death. This choice may limit the inheritance that can be left. However, there is an argument to suggest that your life in retirement deserves to be happy and should be if you have worked hard enough to own your home.
The content in this article was correct on 10th June 2019. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on pensions for teachers and non-teachers. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.