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The complete guide to

UNLOCKING THE CASH FROM YOUR HOME

written by daily express personal finance editor

Harvey jones the complete guide to UNLOCKING THE CASH FROM YOUR HOME


contents 3  Introduction 7 Built for you 8 Pension freedom 10 What is equity release? 14 Myths about equity release 16 How does equity release work? 22 Is equity release right for me? 24 How do I seek advice? 26 Taking account of house prices 27 The importance of estate planning 28 Frequently asked questions ABOUT THE AUTHOR Harvey Jones is a financial writer and editor. He has worked for the Daily and Sunday Express for more than a decade and is currently the Personal Finance Editor for the Daily Express and Sunday Express. He has also written a number of consumer guides for companies such as insurers, pension providers, financial advisers and comparison websites. Š Copyright The Express 2018. The information in this guide is correct at March 2018 but tax and benefit rules, interest rates and product features change frequently. The Express and Key Retirement accept no liability for decisions taken on the sole basis of this information and always recommend you take personal advice.

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INTRODUCTION Equity release is helping tens of thousands of people a year make the most of their retirement, transforming their later years – and its popularity is growing. Equity release is helping tens of thousands of people make the most of their retirement every year, and its popularity is growing all the time. It does this by allowing older people like you to turn the equity in your home into ready cash, in a safe and regulated way. You are free to spend the money on whatever you like, which can transform your retirement and help you live life to the full again.  The cash could help you clear any credit card or mortgage debt and put an end to lingering money worries. Or it could help you do up your home and garden, enjoy life's little luxuries such as a new car or dream holiday, and even help younger family members get on in life. Some pensioners are kicking themselves for failing to save enough for retirement but if you have bought your own home, you could have actually made one of the best investments possible, and should feel rather proud of yourself.  Equity release is your opportunity to put this investment to work and really enjoy later life. Having now hit the mainstream it has gone from strength to strength over the past decade. Over 55's withdrew a total of £824 million of property wealth from their homes via equity release plans during Q3 2017, according to the latest figures from the Equity Release Council. New customers can now enjoy a wider choice with more than 80 plans offering more features than ever, amid growing competition from reputable companies such as Aviva, Legal & General, LV= and more2life. The UK’s housing market has given homeowners record amounts of

property wealth. Equity release customers also have far greater security than before, as the sector is regulated by City watchdog the Financial Conduct Authority (FCA). It is obligatory to take advice before choosing a plan, giving people an extra layer of protection. Ideally, a face-to-face consultation is best practice, typically with two meetings to make sure you understand everything. Equity release is not right for everybody but if you own your own property and find yourself short of ready spending money, it could transform your later years.

Store of wealth Some people feel frustrated to find themselves struggling financially in retirement. Yet if you own your home, you have actually made one of the best investment decisions of all. British house prices have surged in recent decades with the average property now worth £211,433, according to Nationwide. Equity release allows you to put your investment to work, by unlocking some of the equity and spending it freely.

24% of people gift money from equity release Key Retirement Equity Release Market Monitor 2017

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Asset rich, cash poor

HOW PEOPLE ARE SPENDING

The housing boom has left many older people living in homes worth much more than they paid for them, yet many are struggling amid low annuity and savings rates. Equity release can help solve this problem, by unlocking some of the capital tied up in your property and converting it into cash that you can spend now. It will not be right for everybody, but it has helped tens of thousands of ordinary people transform their later years. The average equity release customer drew £63,968 of property wealth in 2017 according to Key Retirement. How much cash you can release will depend on personal factors such as your age and the value of your property. In London, where property prices are highest, homeowners take an average £110,515 compared to around £40,492 in Scotland. Withdrawals are free of tax, so all of the money goes to work on your behalf, after plan fees and your adviser’s charges have been deducted.

As you enter retirement, you may find yourself spending more time at home. The most popular use for the cash released is to make home and garden improvements. People are getting their home retirement ready and making things easier. A new bathroom or kitchen to meet your changing needs or maybe making the garden more manageable. Almost one in four now use equity release cash to help family and friends, typically children and grandchildren, who may be struggling with education fees or need a deposit to get on the property ladder. It effectively works as a living inheritance, giving you control over how the money is used, with the pleasure of seeing it help those you love while you are still alive. It may be better to help out children or grandchildren when they are younger and struggling to pay school or university fees, put down a deposit on a property, or set up a business. That could be more valuable than finally getting an inheritance when they are much older. Around one in three use some of their

HOW IS THE MONEY SPENT?

64%

31%

33%

Home and/or garden improvements

Pay debts (e.g. loans, credit cards)

Go on holiday

24%

22%

12%

Treat or help family or friends

Clear outstanding mortgage

Help with bills

Key Retirement Equity Release Market Monitor 2017

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SEEK SPECIALIST ADVICE Equity release isn't right for everybody, you need to explore alternatives for raising money, such as working into retirement, claiming all the state benefits to which you are entitled, or downsizing to a smaller and cheaper home. Your adviser should help you decide if equity release is the best option for you, or if it's not they’ll tell you. They should also offer advice on setting up a legal document called a Lasting Power Attorney (see page 27), which offers vital protection to anybody taking out equity release.

cash to go on holiday, which can be a real boost for those with family living overseas in places like Australia or Canada, who may rarely get to see the grandchildren.

Sound advice Key Retirement’s Pensioner Property Index shows that homeowners aged 65+ who have paid off their mortgages now own property worth more than £1 trillion in total, a largely untapped reservoir of wealth. This surge in property wealth underlines the growing importance that homes now play in retirement, driving expansion in the equity release market. Older people who bought their home 20 or 30 years ago could be sitting on serious wealth. As people live longer and expect a decent standard of living in retirement, more and more want to unlock this capital. Your home is almost certainly your biggest asset, so you need to feel you are doing the right

thing by taking equity release. This is where support from a reputable and experienced equity release adviser is essential, rather than a general financial adviser who only dabbles in what can be a complicated area. The good news is that equity release plans now come with a host of safeguards. Reputable providers who are members of the Equity Release Council (ERC), all offer something called a no-negative equity guarantee, which pledges that you can never owe more than your property is worth, even if house prices crash. ERC-approved plans also guarantee that you can stay in your home for as long as you would like to, either until you die or go into long-term care. You may even be able to move your equity release loan to a new property (subject to lender criteria), although there may be a charge for doing so, depending on the plan.

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Protected plans are also available, which allow you to guarantee an inheritance for your family.

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built for you Equity release is more flexible than ever with a wide choice of plans that you can tailor to your individual circumstances. One option is something called enhanced equity release, which may allow you to generate more cash if you or your partner has health problems, or smokes. Protected plans are also available, which allow you to guarantee an inheritance for your family. Several plans now give you an increasingly popular option called downsizing protection. With equity release, you are free to move home if you want to, subject to policy criteria, as the plan will move with you. However, your lender may not be able to let you take the loan to certain types of property, such as a park home, and some types of retirement development. You can still do this by paying off your equity release loan, but there may be an early repayment charge for doing so. Optional downsizing protection typically allows you to downsize after five years and repay your loan with no penalty, should the above apply, giving you even more flexibility. Some plans also give you the option of paying some or all of the interest as you go along, which

will reduce the final amount owed and allow you to leave a larger inheritance to your loved ones. Others allow you to pay off a chunk of the capital you borrowed, typically a maximum of 10 per cent a year. This can be a handy option if you suddenly come into money, say, from an inheritance. You now have more freedom to tailor equity release to you and your family's personal needs. The right adviser can talk you through your options. This guide is aimed at those aged 55-95 who are concerned about how to pay for their retirement or want a lump sum to spend for any reason. It is also suitable for those people whose parents or older relatives need to generate more money so they can enjoy the best that retirement can offer. In this guide, we will look at how equity release works, your options for raising extra cash in retirement, what safeguards are in place to protect you, and finally, explain how to get friendly, impartial advice.

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pension freedom

WHAT STEPS SHOULD I TAKE? 1 Read this guide.

2 Discuss your options with an independent equity release specialist.

3 Consult with family members before deciding on a plan of action, and invite them to take part in the process.

4 Make the most of your future!

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New pension freedoms have put people in control of their lifetime savings. Under pension freedom reforms, those aged 55 and over can now cash in their pension pots, rather than being obliged to buy an annuity. Almost 800,000 people have done just that, taking a total of ÂŁ6.5billion in 2017 alone, according to HM Revenue & Customs. However, people who draw large sums or even cash in their full pension risk running out of money far sooner than they expect, and may end up short of cash in their final years. Another downside is that you may also be liable to pay income tax on any cash withdrawals. If you withdraw too much in one go this could push you into a higher tax bracket for that tax year, and the bill could eat up your savings. Some could hand over as much as 40 or even 45 per cent of any withdrawal to HM Revenue & Customs, depending on their income from other sources and how much they take. This is a complicated area, and specialist independent advice is important to find the right course of action.Another concern is that most people simply have not saved sufficient money to ensure a comfortable retirement but equity

release could help top up any shortfall, easing financial worries.

WHY ShOULD I SPEAK TO AN ADVISER? Once you have read this guide, you should have a good idea how equity release works and what it can offer you. Before you decide if it's right for you, a specialist independent equity release adviser should take an in-depth, expert look at your circumstances to help you decide whether equity release is the right option for you. With so many equity release products and options to choose from, talking to an independent adviser may be the best way to find the right one for you. If you speak directly to a company that sells equity release plans it will only sell you its own products. An independent adviser, on the other hand, will be able to advise you on equity release plans from across the whole market. This means you are getting access to the widest possible range. You can speak to an adviser without making any commitment to sign up to a plan, and the initial no-obligation consultation shouldn’t cost you anything.


PAY OFF INTEREST-ONLY MORTGAGE DEBT Equity release may be a solution for hundreds of thousands of British homeowners who are heading towards retirement with outstanding interestonly mortgage debt. Many have absolutely no way of paying off their borrowings at maturity and risk losing their homes as a result. According to a recent warning from City watchdog the Financial Conduct Authority (FCA). The worst affected are older homeowners who took out a mortgage in the 1980s and 1990s backed by an endowment plan designed to clear the debt. Equity release is proving an increasingly popular way of paying off this debt, with Key Retirement

reporting that more than one in five of its customers use at least some of the cash released to clear an outstanding mortgage, and this is likely to increase. You should, of course, consider all your options, such as dipping into your pension or downsizing to a smaller property to raise enough cash to clear the debt, but this will not be possible for everyone. Remember that after the first 25%, pension payouts are taxable, so you may have less than you think after HM Revenue & Customs has taken its share, whereas downsizing can be expensive and may raise less than you think. The money you will be unlocking from your property is tax-free. For tens of thousands of homeowners, equity release may be the solution for a much-needed escape route from their interest-only nightmare.

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what is equity release?

Equity release plans help you unlock some or all of the value of your property without having to sell up or move out You and your partner can carry on living in your home for the rest of your lives. The most popular type of equity release plan, known as a lifetime mortgage, is designed so you can take out a long-term loan using your property as security. You don’t have to make any repayments on this loan while you are alive. Instead, the interest on the money you borrow rolls up, year after year, until the total debt is finally repaid when your house is sold after both you and your partner die or go into long-term care. Some plans also allow you to make monthly payments of interest to reduce the speed at which the interest rolls up, with the option to convert to roll up at any point if you want to stop

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making these payments. An alternative type of plan, known as home reversion, lets you sell all or part of your home for a cash lump sum, again, with the right to continue living there for the rest of your lives. If you have children or family, you should seek their views before taking out an equity release plan. It is important to involve them in the decision, as equity release will affect the amount of money they potentially stand to inherit. A good adviser will encourage your family’s involvement. However, most children are keen to see their parents enjoy their retirement, using the wealth they have accumulated in their own home over their lives.


DO YOU QUALIFY FOR EQUITY RELEASE?

1 You are aged 55-95.

2 You own your own home, and it is worth more than ÂŁ70,000.

3 You live on the UK mainland or in Northern Ireland.

There may be other factors you need to consider, so consult with a specialist independent adviser who is familiar with all the plans available and the criteria you need to meet to take out a plan.

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Downsizing your property can help to boost your retirement spending.

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WHAT ARE THE ALTERNATIVES? DO NOTHING If you have a large pension or other savings that can be easily turned into cash, you probably do not need to take out an equity release plan. Workers whose pensions are large enough to produce the income they need probably don’t need to use their home to raise money either, although it might be appropriate for larger capital-hungry expenses.

MOVE TO A SMALLER PROPERTY If you own a home that has increased in value over recent years, you might consider the option of downsizing to a smaller property, and using any profit gained from the move to boost your retirement spending.

THE NEED FOR ADVICE

Be warned, as the costs involved in trading down, which can include estate agents’ and solicitors’ fees, stamp duty and removal costs, may run into thousands of pounds. You also have to account for the cost of purchasing a new property. Retirement properties such as bungalows can be surprisingly expensive as demand now outstrips supply. Developers rarely build new bungalows because they can make much more money from larger two or three-storey homes, and this has reduced availability and raised prices. Also, many people will be reluctant to leave a family home with sentimental value, especially if it means moving away from friends and family who live nearby.

The role of a specialist independent equity release adviser is to discuss all your options to ensure you find the correct solution for your financial needs both now and in the future.

OTHER FORMS OF BORROWING Equity release is not the only way to raise cash in retirement, for example, you might be able to take out a conventional mortgage or an unsecured personal loan. However, a conventional mortgage or loan will involve a monthly repayment commitment, and you may struggle to afford that from your income. Another problem is that it’s not that easy to get a conventional mortgage as you get older. Lenders fear you won't be able to manage your repayments after you stop working and your regular income dries up. The regulatory authorities have tightened lending rules and many lenders are rejecting older applicants as a result. This isn't a problem with equity release, because you don't have to make any repayments at all. The debt is ultimately cleared by the sale of your home when you pass away or move into long-term care. A specialist adviser will consider whether this option is suitable depending on your circumstances.

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MYTHS ABOUT EQUITY RELEASE

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"I'VE GOT NO PROTECTION IF SOMETHING GOES WRONG."

"I WON'T BE ABLE TO LEAVE INHERITANCE TO MY FAMILY."

City watchdog the Financial Conduct Authority (FCA) regulates equity release plans and all providers have to comply with its rules. The Financial Services Compensation Scheme gives equity release customers further protection.

Some plans allow you to guarantee a proportion of your home’s future value as an inheritance. This is called protected equity. Equity release plans will reduce the value of your estate but may enable you to help your loved ones now when they need it.

"IF I take out an equity release plan CAN i BE KICKED OUT OF MY HOME?" Plans approved by the Equity Release Council guarantee that you can stay in your home as long as you wish, either until you die or go into longterm care.

"MY FAMILY COULD END UP OWING MORE THAN THE HOUSE IS WORTH" Reputable providers who are members of industry body the Equity Release Council all offer a nonegative equity guarantee, which pledges that you or your estate can never owe more than your property is worth, even if house prices crash.


POINTS TO CONSIDER Before you take out an equity release plan, you need to discuss a number of key factors with a specialist equity release adviser to make sure this is the right thing to do for you, your partner, and your family.

Will equity release affect my eligibility for state benefits? Many benefits such as pension credit and council-tax benefit are means-tested, so the more income or capital you have from other sources, the less benefits you may receive. Some advisers have specialist computer software that analyses your current entitlement to benefits, and explains how they would be affected by equity release. They can also show how to release equity in a way that has no effect on your entitlements. Your adviser can also tell you whether you are claiming all the benefits you’re entitled to.

How will equity release affect the inheritance I can leave my family? By unlocking some of the value of your home now, you will reduce the size of your estate. Again, a specialist adviser can explain how equity release will affect your family’s inheritance, and what options you have to guarantee an inheritance, if this is important to you. Your adviser should also stress the benefits of involving your family in the decision to release equity from your home.

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how does equity release work? I

TYPES OF EQUITY RELEASE Different types of equity release plans work in different ways. Each has its advantages and disadvantages depending on your circumstances. This is why you should sit down with an experienced, independent specialist adviser to work out which plan is most appropriate for you.

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LIFETIME MORTGAGE

A lifetime mortgage enables you to take out a loan secured on your home and receive a tax-free lump sum in return. Unlike a traditional mortgage, you do not typically have to make monthly repayments. The interest simply rolls up over the period of the mortgage, and only has to be repaid, along with the capital you originally borrowed, when your home is sold following the death of the last surviving partner, or when they move into long-term care. Increasing demand for lifetime mortgages, as well as record low interest rates, means that rates are becoming more competitive. Interest rates have also been driven lower by increased competition between providers. Lifetime mortgages are available to those aged 55-95, and while age is one of the main considerations for how much you can release, other factors such as your health and lifestyle also play a part. Equity release firms will only lend to owners of properties worth at least ÂŁ70,000. To give customers peace of mind, all providers currently offer

lifetime mortgages with the option of fixed interest rates. This means the rate remains the same over the term of the loan, irrespective of what happens to interest rates in the wider economy. Plans approved by the Equity Release Council guarantee that you can live in your home for the rest of your life. They also offer a hugely valuable no-negative equity guarantee, which means you can never be asked to repay more than the value of your home at the end of the mortgage.

enhanced

II LIFETIME

MORTGAGE

If you or your partner have a serious illness or an unhealthy lifestyle, you may be eligible for an enhanced lifetime mortgage, which allows you to unlock more money from your home. Enhanced plans are available for a wide range of health conditions including high blood pressure and diabetes. Even a lifestyle choice such as smoking could mean you qualify. Applying for an enhanced lifetime mortgage is straightforward and does not require a medical.


David, a 65-year-old catering manager from Staffordshire, has always considered himself healthy for his age. Two years ago he was diagnosed with prostate cancer, but it was caught early, treated, and luckily he has made a full recovery. He does not feel his fitness levels in general are a concern and goes about his days without any problems getting around. Although he does have high blood pressure, it does not affect his daily routine and he's largely untroubled. His GP has advised him to do more exercise to improve his health. He has also been prescribed medication to control his blood pressure. David has lived in his home for more than 25 years and has not had a new kitchen since he moved

37.5% Healthy LTV1

there. He loves cooking and would like to update the kitchen and open up his dining room to create a more social family space for when his grandchildren come to visit. The problem is that he does not have the money to make the alterations that he wants to implement. He got chatting about his finances to a family friend, who suggested he looked at a lifetime mortgage. If David did not declare that he had previously had cancer and suffers from high blood pressure, he would be able to release a sum of £79,118 from his home, valued at £210,982. But if he confirms he suffers from high blood pressure and has had prostate cancer, he could release £87,135, which is an extra £8,017.

example STORY David, 65

41.3%

Enhanced LTV3

£87,135

£79,118

Based on a property value of £210,9822 Based on the best in market loan to value for a healthy 65 year old (December 2017). Based on an average house price of £210,982 (Nationwide Building Society HPI Q3 2017). 3 more2life LTV for a 65-year-old who has high blood pressure and previously had cancer (December 2017). 1

2

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PROTECTED PLANS – GUARANTEEING AN INHERITANCE III

Some plans allow you to protect a percentage of your home’s future value. This useful feature means you can guarantee an inheritance to your family and loved ones.

DOWNSIZING IV PROTECTION All Equity Release Councilapproved plans allow you to move home if you wish, subject to criteria, but some properties are excluded, such as park homes and certain types of retirement development. You can still move if you pay off your loan, but you may also face an early repayment charge on top. If the property is not acceptable, you can avoid the charge by taking out a plan that includes optional downsizing protection. This allows you to pay off your loan, if the property is not acceptable, with no penalty, provided the plan has been running for five years or more.

V

DRAWDOWN LIFETIME MORTGAGE A highly popular and flexible type of lifetime mortgage, known as a drawdown plan, allows you to take cash in stages as you need it. You are only charged interest on the money you have taken, which can reduce the total interest you pay. Typically, you have to take an initial minimum lump sum of £10,000, but can withdraw sums from as little as £2,000 thereafter.

VI

A COMBINED SOLUTION

It is possible to combine different options within the same lifetime mortgage. For example, you could set up a drawdown plan with the

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option to protect a proportion of equity and leave a guaranteed inheritance for loved ones. A specialist independent adviser will discuss your various options and how they suit your needs.

VII INTEREST

PAYMENT PLANS

With most equity release plans you don't have to make any monthly repayments, as you would with a traditional mortgage. But some plans do give you the option of making interest payments to reduce the amount you owe your provider at the end of the plan.

VIII

HOME REVERSION PLANS

This type of plan involves selling part or all of your property to an equity release provider. In return you get a tax-free cash lump sum plus a lifetime lease with no interest to pay, giving you the right to remain living in your property until you and your partner die or move into long-term care. Any increases in your property’s value after you have taken out the plan will be shared between you and the plan provider in line with the proportion sold. Reversion plans have fallen out of popularity of late, because lifetime mortgages tend to be more flexible.


REAL LIFE STORY Jean, 60 Like many women, Daily Express reader Jean, from Manchester, expected to receive her state pension at 60. But when this was raised to 66 she was left disappointed and reluctant to work as her health deteriorated. “I needed a knee operation, but I was worried how I would be able to get the time off work and pay the bills whilst being out of action,” she says. Jean, who used to work as a pharmaceutical dispenser, decided to take action and find out more information about equity release and booked an appointment with her local adviser. “My adviser was very helpful – I didn’t realise I could leave a guaranteed inheritance to my children and still have the option to move house if I took out a plan,”

explains Jean. After speaking with her adviser, Jean decided to go ahead and took out a lifetime mortgage. “For me, equity release was the best solution and has taken away my financial worries. “I felt a weight had been lifted from my shoulders – I had suffered from many sleepless nights worrying about my future. “Since taking out equity release, I have undergone my knee operation and I’m on the road to recovery. My lifestyle is much better, I can enjoy going on holiday to Benidorm and going out for meals with my family. “I’m able to help my children out financially and see them enjoy it. “Equity release has given me so much freedom – I have recommended it to many of my friends.”

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SWITCHING PLANS As the number of plans on the market increases, it is increasingly easy to switch from one to another, say, to take advantage of lower interest rates or release more money. You may face some extra charges if you move to another plan. It is therefore vital to seek expert guidance before deciding whether this is appropriate, and whether the potential extra charges are worth incurring. Your adviser will be able to do all the sums for you.

Comparison Chart Feature

Lump Sum Lifetime Mortgage

Take smaller amounts of money when you need them

You own all of your home

20

Drawdown Lifetime Mortgage

You sell a share of your home

Interest accrues on the loan

Home Reversion Plan

✓ ✓


Speak to an expert adviser to see if changing plans could save you money.

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Is equity release right for me? HOW TO BE SURE THAT IT'S FOR YOU All ERC-approved equity release plans guarantee that: 1 No family will face negative equity. (Where the amount of money they owe exceeds the value of their home.)

2 You can move property if you wish (subject to criteria).

3 You have the right to live in the property for the rest of your life.

4 The plan will come to an end when your home is sold, usually when both you and your partner have either died or moved into long-term care.

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If you are interested in equity release, it is important you have complete confidence that this is the most suitable course of action for you. You should therefore approach an adviser who will recommend plans offered by an accredited member of equity release industry trade body the Equity Release Council (ERC). Every member of the ERC is obliged to sign up to a statement of principles, which ensures their equity release plans are drawn up in the customers’ best interests. Further to the protection offered by the ERC, City watchdog the Financial Conduct Authority (FCA) regulates the sale of equity release plans. This means that firms which sell the plans must meet FCA rules on marketing, sales literature, and advice. Customers benefit from statutory protection and, if needs

be, access to official compensation schemes such as the Financial Services Compensation Scheme. Traditionally, the family home has been considered an asset that can be passed on to the next generation in the form of an inheritance. But research has found that the majority of children are happy for their parents to take out equity release plans. Experienced independent equity release advisers will always recommend you involve your family in any decision to use equity release. And as mentioned, today’s equity release plans allow you to protect at least some of their inheritance should you wish to.


Research has shown that the majority of children are happy for their parents to take out equity release plans.

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How do I seek advice?

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An experienced adviser will be able to explain whether equity release is suitable for you, how it can help, and the potential benefits and drawbacks of the different plans on the market. The Financial Conduct Authority (FCA) regulates equity release advice. The FCA’s predecessor, the Financial Services Authority, has in the past warned consumers to be careful, because some advisers merely 'dabble'

in equity release, only occasionally arranging such plans for their clients. Make sure your adviser regularly deals with equity release, and that it is a major part of their business, to ensure you’re getting the very best advice.

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taking account of house prices If you decide an equity release plan is right for you, future house prices will play an important role in determining how much equity will remain in your home when the plan comes to an end – and how much is left for you to pass on as an inheritance. House prices continue to rise – although the pace of growth has slowed lately. Over the last 20 years the average UK house has more than tripled in value, according to the Nationwide House Price Index. Buying your own home is likely to be one of the best financial decisions you ever made. If property prices continue to

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increase, there may be more equity to leave to your beneficiaries even after the loan is repaid. If they don’t, you may want to prepare your family for the fact that their inheritance may be smaller than they expected. This is why it is important to discuss your plans with your family and seek specialist independent advice.


the importance of estate planning WILLS

DON'T FORGET If you take out a drawdown lifetime mortgage, you and your partner should both set up LPAs because each time you wish to draw down funds, both partners need to give their consent. Without an LPA, if you are unable to sign, further access could be denied or delayed.

A will ensures that your property, assets and possessions are distributed according to your wishes, and can also express what you want to happen in the event of your death, for example, you funeral plans. As a result of making a will, estates are normally settled relatively quickly and inexpensively. Trusts can also be set up in a will to help reduce inheritance tax liabilities. You should always seek professional help in writing your will.

LASTING POWERS OF ATTORNEY You must take legal advice before taking out an equity release scheme and your adviser should also talk about setting up a document called a Lasting Power of Attorney (LPA). This gives a trusted family member or friend the legal right to make financial decisions on your behalf if you are unable or unwilling to do so yourself, say, following dementia or an accident. They can help with important practical matters such as paying your bills, dealing with your bank, and also managing your equity release scheme. If you take out a drawdown lifetime mortgage, you and your partner should both set up LPAs because each time you wish to draw down funds, both partners

need to give their consent. If one of you is unable to sign and you do not have an LPA, further access could be denied or delayed. If you are single it is just as important to nominate someone you trust to make decisions for you and to provide potential access to further funds if you need them. Once you have set up your LPAs, your appointed attorney could call on your equity release scheme to draw down more money to help pay for your additional care needs or make adaptations to your home. They will not have the legal power to do this unless you have signed an LPA while you are still fit and well. All older people should seriously consider setting up LPAs, but it becomes even more important when you take out equity release. There are two types of LPA, one to cover decisions regarding your property and financial affairs, and one to cover your health and personal welfare. You choose who can act for you, and under what circumstances this is permitted. This provides the peace of mind that those who care about you the most are acting in your best interests and will help you continue to make important decisions. Based on the laws of England and Wales.

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frequently asked questions Will I be able to stay in my house? With any ERC-approved plan, you will be able to stay as long as you wish. It is also possible to move home, subject to criteria.

Do I have to make monthly repayments? Typically no, the equity release provider only receives full repayment from the final sale proceeds of the property. But some plans let you make monthly interest payments (subject to a minimum), if you want to reduce the total cost of the plan.

Can I downsize without penalty? With most plans you are free to move home if you wish, subject to criteria, and transfer the equity release plan to your new property. However, exclusions include moving to properties such as a park home, or certain types of retirement development. In that case, you will have to pay off the loan, possibly with an early repayment charge. However, you can escape this additional charge by taking out a plan that includes optional downsizing protection.

Will I receive a cash lump sum or can I withdraw in stages? A drawdown plan lets you take money in stages as and when you need it, after taking an initial amount, meaning you pay less

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interest. The decision is yours so discuss it with a specialist independent adviser.

How much will I receive? This depends on a number of factors such as your age, the value of your property, you and your partner’s health and lifestyle, and which plan you decide is the right one for you.

What happens if the value of my home drops? Nothing. The terms of your equity release plan are based on the value of your home when the deal is made, so any subsequent changes to its value will not have an effect. As protection, all ERC-approved plans will have a no-negative equity guarantee. Future increases in your home’s value may give you an opportunity to release more equity, while a drop in its value may restrict the amount you can borrow in the future.

What happens if my equity release company goes out of business? Your plan will simply be transferred to another company.

Will it affect the inheritance I leave? Yes, but you can have some control over how much inheritance you want to leave, depending on the plan you choose. Choosing a protected plan means you can protect a percentage of your home’s future value to


guarantee an inheritance for your loved ones. Advisers stress the importance of talking to your family before signing up to a plan. You should also seek expert guidance on making a will.

What happens to my tax bills and means-tested state benefits? Any cash you receive from the property is free of tax. There may be an impact on the means-tested benefits you are entitled to. Talk to your adviser about your own circumstances, as they may have access to specialist software that can calculate exactly how equity release would affect your entitlement.

Should I discuss the plans with my family? It is important to involve your family as any plan will reduce the value of inheritance that you can leave. However, most customers find that their families support their decision to take out an equity release plan. A reputable adviser will also be happy for you to have relatives or friends present at any consultation.

What happens if I am moved into a residential or nursing home? If you have a plan in joint names, your partner can remain living in the home without it affecting your means test for long-term care fees. If you are the last surviving partner your home would be sold, and the loan would be repaid from the proceeds.

What happens when I die? The house will be sold and the money owing is paid to the equity release company. But the house will not be sold until both you and your partner, if you have one, have died or moved into long-term care.

the complete guide to UNLOCKING THE CASH FROM YOUR HOME

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Why choose Key Retirement You have taken your first steps to discovering financial freedom by requesting this exclusive guide from The Express, sponsored by Key Retirement. Customer satisfaction is at the heart of everything we do. We pride ourselves on being independent, transparent, supportive and straightforward. We are passionate about helping you to make the most of your finances when you are in or approaching retirement.

Advice in the comfort of your own home, with a local adviser

Hassle free service meaning you could be enjoying your tax-free cash in as little as 8-12 weeks

100% independent advice

If equity release is not right for you, your adviser will tell you

With a lifetime mortgage the loan is secured against your home. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. You should always think carefully before securing a loan against your home. Unless you decide to go ahead, Key’s service is completely free of charge, as Key’s typical advice fee of 1.95% of the amount released would only be payable on completion of a plan.

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Our advisers compare the whole equity release market to find the product that meets your needs


REAL

LIFE “We thought we might as well be enjoying it while we can”

David says: “We downsized David and Pam had been to our bungalow almost considering equity release a year ago to be closer for a while when their to a bus route and local friends recommended Key amenities. The new place Retirement. They contacted was a bit dated and we are a few companies to do their quite modern in our outlook research but were most impressed with the customer so we wanted to give the place a face-lift. service from Key and arranged a meeting with “We love being outside in their local adviser. the garden and wanted

something that was low maintenance as we get a bit older. We have put down artificial grass and planted up all our borders which are really starting to mature. “The equity release has given a real boost to our retirement finances and we are so glad we did it.”

For impartial information call Key Retirement, the multi- award-winning specialist

Call free

0800 531 6032

Lines are open Monday to Thursday 9am – 8pm, Friday 9am – 5.30pm and Saturday 9am – 5pm

www.keyretirement.co.uk/express the complete guide to UNLOCKING THE CASH FROM YOUR HOME

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Key Retirements Solutions Guide 2018  
Key Retirements Solutions Guide 2018  
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