Monthly Archives: February 2011

The income drawdownGAD rate for March 2011 will be set at 4.25%. Remember this is the last GAD under the old drawdown rules and will be replaced by the new Capped Drawdown and Flexible Drawdown from April onwards.

Therefore the GAD calculations with a £100,000 fund will be:

Male, 60 [100% GAD = £6,200]

[Max income (120% GAD) = £7,440]

Male, 65 [100% GAD = £7,000]

[Max income (120% GAD) = £8,400]

Female, 60 [100% GAD = £5,900]

[Max income (120% GAD) = £7,080]

Female, 65 [100% GAD = £6,500]

[Max income (120% GAD) = £7,800]

*The minimum income remains at zero.*

According to Bridgewater Equity Release the top five uses for the released cash for home reversion sales and further advances throughout 2010 were:

1. Repay mortgage: 43%
2. Home improvements: 31%
3. Consolidate other debts: 27%
4. Travelling: 19%
5. Buying/repairing a car: 12%.

Bridgewater’s customers’ were allowed to detail more than one intention for the cash they released from their home.

We asked Jennie Gray, independent financial adviser and equity release expert, for here comments: Jennie said, “There are more and more UK consumers reaching retirement age with a mortgage still outstanding, sometimes this is due to an endowment policy having a shortfall or the fact they have increased their mortgage at some point and not increased the endowment or taken it on a repayment basis. It is very worrying for pensioners in retirement to pay mortgage payments so it does not surprise me to see that repay mortgage is number 1″.

Peter Barton from Ashfords solicitors recently wrote a guide on bankruptcy and equity release. Alarmingly, Peter says that bankruptcy amongst pensioners has increased 6 fold in the last 10 years.

How can equity release be used alongside bankruptcy

The guide, which is very useful for those pensioners or their friends and relatives that are considering or already in bankruptcy. Peter and Ashfords are experienced solicitors in equity release.

The guide gives the following advice:

A person in financial difficulty has a number of options available, either in order to try and avoid bankruptcy
altogether or in order to protect his/her home.  Equity release can be a means of raising funds to pursue one of the following options:

• Buying back the Trustee’s interest;
• Seeking an annulment of the Bankruptcy Order; or
• Entering into an IVA or FTVA with creditors.

Here at Retirement Solutions (UK) we asked Jennie Gray to comment on using equity release to protect the home, Jennie said, “Firstly, Peters guide is very good and anyone looking for information on using equity release in relation to bankruptcy should visit Ashfords website and download a copy. As with anything like this pensioners need to seek specialist legal and financial advice to avoid getting things wrong. I would advise pensioners to contact an independent financial adviser or a solicitor that specialises in equity release”.

Peters conclusion is:
Clearly the best option for a debtor would be to avoid bankruptcy altogether by using Equity Release to pay
creditors in full or, if that is not possible, to fund an IVA with creditors. Following bankruptcy, costs will start to rise, with Trustee’s fees, legal fees and ad valorem duty accruing. As a result it will be more difficult, but not necessarily impossible, for the Bankrupt to raise sufficient funds to purchase the Trustee’s interest or to present a viable IVA proposal.

The charity Age UK and JRS (Just Retirement Solutions) have launched a new equity release advice service which will allow those that qualify to draw as little as £500 from the scheme.

Gordon Morris, Managing Director of Age UK Enterprises said: “Many people reach retirement and realise that the state pension will not provide the comfortable lifestyle that they had hoped for. During their working lives, they will have worked hard to pay off a mortgage and it may be that when they retire, their home can be used to supplement a meagre pension.

Adam Benson, Equity Release Adviser from Retirement Solutions (UK) Limited, said, “This looks a good scheme and if people can release as little as £500 then that is marvelous providing the cost of doing so is not too expensive. This is just the type of boost the equity release market needs right now to promote the product to the mass market, there has been so much bad press about equity release and it is good to see some really exciting new products being marketed”.

At the same time as promoting equity release JRS are also providing a benefits check to ensure that all available state benefits are claimed. There are thought to be thousands of pensioners that never claim the full entitlement of benefits, some because of ignorance and others because it is too complicated.

Those retirees that reach retirement with small annuity pots could turn to home equity release to help fund their retirement income. With the pension industry quoting that 80% of retirees reach retirement with annuity pots of less than £25,000 it means hundreds of thousands of retirees will suffer low income during their retirement years.

Home equity release could be the answer for many of those reaching retirement with low annuity pots and also own their own home. These are classed as the asset rich cash poor retirement baby boomers.

How can home equity release help those on low annuity income?

Home equity release could allow some of these retirees to raise a regular income from the equity in their homes, sufficient to fund the shortfall in the income they require and the income they will receive from pensions. It will not be the right solution for everyone but could help thousands to have a better retirement.

Here at www.retirementsolutions.co.uk we asked Jennie Gray, independent equity release specialist to comment on using home equity release to help fund income in retirement, Jennie said, “Home equity release is not the perfect solutions as the products are limited in those that produce a regular income, since Northern Rock pulled out of the market with their monthly release product there has been no replacement. Experienced advisers can use a work around from some of the providers but not is guaranteed indefinite”.

LV= the retirement solutions provider has improved the rate on its Protected Retirement Plan from today, 4 February 2011 which will give clients improved terms. The Protected Retirement Plan is a fixed term annuity product that gives a guaranteed maturity value at the end of the fixed term allowing retirees to consider their retirement options again.

At retirement retirees have a multitude of retirement options available some of which they have never heard of, but none the less could be of benefit to them to provide their retirement income. Far too many opt for the lifetime annuity option mainly because it provides guaranteed annuity rates that give peace of mind.

However, with annuity rates being the lowest for decades it makes sense for annuitants to consider the wider range of annuity options that are available, these are: Fixed Term Annuity, With Profits Annuity and Asset-Backed Annuity. Seeking the help of an independent financial adviser will ensure that the full range of annuity options are considered.

Of course annuities are not the only source of retirement income and for those with funds over £200,000 income drawdown or unsecured pension as it is officially titled should be considered. An adviser will asses your attitude to investment risk and then make a recommendation from all the products that might be suitable for your personal circumstances.

There are two main types of equity release schemes, home reversion and lifetime mortgage, here at retirementsolutions.co.uk we are asked many times, which is best?

Each of the two types has advantages and disadvantages and these need to be investigated to see which one might be most appropriate for your own personal circumstances and objectives. You should also seek independent legal advice before committing to either scheme.

Lifetime Mortgage as it says is a mortgage secured against your home, you can choose a scheme that allows you to pay interest each month or a roll up interest scheme. With the roll up interest scheme the debt will increase each year and because most lenders charge compound interest you will pay interest on the interest you are charged.

Home reversion on the other hand involves you selling all or part of the property to raise equity. These schemes have the advantage of no interest to pay and also knowing what per cent of the property is still owned by you. Of course there is discounting which means you only get a percentage of the portion you sell as the price is discounted because the reversion provider will have to wait until you leave the property on death before they will get their money back.

So which is best, lifetime mortgage or home reversion?

Well as you would expect us to say, lifetime mortgage or home reversion, it depends on you and your objectives and your attitude to risk.

Seek independent legal and financial advice and discuss the advantages and disadvantages of each then make a decision.

According to a poll carried out by the charity Stroke Association of 2,000 people, nearly one in five believed they were stressed compared to one in ten for men. The charity is warning that high stress levels can increase the risk of stroke.

Enhanced annuities are available for those that have medical conditions including those that may have suffered a stroke. High blood pressure, lack of exercise and poor diet are one of the major contributory factors in the cause of strokes.

The charity also concluded that almost a fifth of those surveyed had admitted to taking no exercise at all. Forty per cent of respondent also were not aware of the link between exercise and stroke prevention.

Here at retirementsolutions.co.uk we are well aware of the risks that lack of exercise and poor diet can have on health, we deal with hundreds of enquiries every month where our clients qualify for enhanced annuities due to medical conditions such as stroke, high blood pressure and raised cholesterol levels. According to Just Retirement, the enhanced annuity provider, there are now something like 5,000 medical conditions that on their own or in combination qualify for enhanced annuities.