Raising the state pension age to 70 will boost the number of elderly homeowners taking out an equity release scheme before they reach retirement age.
Many elderly people are already struggling to afford a comfortable retirement and delaying receipt of the state pension to 68 and beyond will only make life harder, according to the Equity Release Council.
Chancellor George Osborne said in yesterday's Autumn Statement that he was establishing a new principle that people should spend one-third of adult life in retirement.
This implies a faster increase in the state pension age to 68 in the mid-2030s, age 69 in the late 2040s, and ultimately to 70 and behold, as life expectancy rises.
This means people will have to wait longer to get this vital income, said Nigel Waterson, chairman of the Equity Release Council. "Raising the state pension age may seem a logical step when life expectancy is going up, but it puts more emphasis on wages, savings and other investments to sustain people financially on the approach to retirement.
“Poor savings returns and rising living costs mean that many are struggling to afford a comfortable retirement. In the current climate, the delayed receipt of state pensions will be a worrying prospect for younger generations.
"More than one-third of the population will be aged 55 or over by 2046. This change may prompt even more to consider options like equity release before they reach state pension age, to make the most of their assets and ease their passage into retirement.
The Chancellor had good news for people who took out home income plans before 1999, confirming they will continue to receive mortgage interest relief.
Waterson said: "The Council and its members have worked hard to protect this benefit. If removed, it could have resulted in a £400 loss of yearly income for those affected, a significant sum for anyone whose late-life finances are delicately balanced.
“Part of the challenge of financial planning for retirement is preparing in advance, which is why we welcome the move to honour the original support offered with these loans.
"Providing confidence, security and lifelong guarantees is at the heart of The Council’s work to support the equity release industry, and we are grateful that HMRC registered our views through its consultation on this issue.”
Comments