The new 'single-tier' pension & the impact for equity
The UK government has announced their latest plans to change the
state pension to a simpler clearer system. Under new legislation,
from April 2017, there will be one 'single-tier' pension set at
£144 for all. To qualify for the full amount, 35 years of national
insurance contributions are required. To receive any pension at
all, a minimum 10 years of contributions are required.
While providing an enhanced pension for those currently relying
only on the state pension, it marks a significant cut in income for
those higher earners who would currently qualify for the second
state pension. Figures in the Government's White Paper show that of
those retiring in 2040, about 45 per cent will be worse off while
35 per cent are expected to be better off, and 20 per cent are
expected to remain the same. For those 45 per cent who won't
benefit from the pension scheme - either because they'll reach
retirement prior to the April 2017 start date, or because the new
scheme will reduce their expected state pension- equity release
could provide a solution.
With recent research* revealing retirement income has hit a
six-year low, falling by £3,400 below the average expected UK
retirement income of £18,700, understanding all the available
funding options is more important than ever for pensioners. Despite
being cash poor, many retirees are sitting on hundreds of thousands
of pounds of equity in property, with many owning homes which are
completely mortgage free. Equity release schemes can help free this
property wealth, either providing a loan based on the value of the
property or regular cash withdrawals. With various types of equity
release plans to choose from, owners can find the perfect solution
to meet their financial requirements while remaining in their own
The current media spotlight on the new state pension plan has
reignited public interest in retirement financing, thus making
comprehensive equity release information and equity release advice
more important than ever.
*Prudential, January 2013
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