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Relying on a Top-up or Drawdown Facility on your Equity Release Plan? Check the small print.

checking small print

A recent survey by Saga has highlighted the increasing financial burdens faced by the over-50s which are forcing them to make serious spending cutbacks. More than 60% said the quality of their lifestyle has ‘crashed’ during the past 12 months. They are not living ‘on the breadline’ says the report, but having to watch their non-essential spending by cutting back on things like holidays and using the car, as well as reducing leisure related treats.

15%, however, are reducing ‘essential’ spending, like heating their home; a worrying thought for those with older relatives?

Equity Release as a Pension Top-up

Up until a few years ago, the most popular use of equity release was funding home improvements. Next up, mortgage and debt repayment took over as interest rates plummeted. More recently, supplementing a pension accounts for most plans taken out and this is surely due to the rising costs of living and the drop in projected pension income.

Traditionally, those taking out an equity release plan to use as a pension top-up have been encouraged to keep the amount released at the outset to a minimum in order to reduce long term costs and protect any means-tested allowances. Draw down Lifetime Mortgages and staged payment Home Reversion Plans have therefore become very popular.

Not Every Plan Guarantees a Drawdown Facility

However, it is little known by those outside the equity release industry that not every plan carries with it a future cash-release guarantee. Clauses can allow providers of Lifetime Mortgages to remove a drawdown facility without notice and with Home Reversion Plans, a top-up guarantee is not always included in the offer.

It is crucial, therefore, that clients considering equity release with a specific need or desire for a top-up facility, are advised by a specialist who can recommend a plan with that does carry the appropriate guarantees so that they can be certain of their income in retirement.

At Bower, we ensure that all plans recommended to our clients are properly fit for purpose. There are plans that carry the relevant guarantees, and we’ll know which ones they are, and whether they are suitable for clients’ needs and work in their best interests.

Equity release may involve a lifetime mortgage or home reversion plan. To understand the features and risks, please ask for a personalised illustration.

Bower is an FCA regulated independent financial advice company that offers specialist advice on equity release throughout the UK. For more information email [email protected] or call 0800 4118668.