Reform 'could lead to increase in equity release'
07 September 2011
Many older people may be concerned about their financial situation, due to factors such as record low interest rates combined with high inflation eroding away their savings.
But equity release schemes could prove to become a more popular option in the coming months and years if things do not get any better.
According to Ian Atkinson, a long-term care expert and independent financial advisor at intermediary company Retirement Solutions, there is a lot of debate at the moment surrounding recommendations made as part of the Dilnot Commission Report on the funding of care.
Writing for the Mortgage Finance Gazette, Mr Atkinson pointed out that as many as 10 per cent of people in England are going to require care at some time in their life.
He explained that of these, some 90 per cent could be in line to lose assets - which could include their home - under the current system.
The Dilnot report claims that equity release plans are set to continue to be a "key" option for individuals who find themselves in a position where they may otherwise be forced to sell their house and move to another property - which is known to be a stressful event for older people.
Mr Atkinson noted: "The benefits of this would cascade down to family and carers, and would mean that the stress of illness could be reduced to some extent.
"Equity release could therefore become a very popular way for elderly people to pay for their care needs without losing the familiarity of their own family environment."
He explained that he believes it is "likely" equity release schemes will be set for a boost in usage if the reforms recommended in the Dilnot report are to be brought in by the coalition government.
A decision is yet to be made by the state regarding the proposals, due to the cost they are expected to mount up to, with health secretary Andrew Lansley set to publish a white paper in response to the report early next year.
Mr Atkinson highlighted the fact that some 25 per cent of those over the age of 65 are facing care bills in excess of £50,000, with another ten per cent looking at costs over the £100,000 mark.
Dr Ros Altmann, director-general at Saga, recently stated that it can "make sense" to turn to equity release for some individuals who need to raise cash in order to pay for their care.
This could lead to homeowners aged between 55 and 95 using the equity release calculator from Key to see how much money they could free up from their property.
Posted by Christian O'Leary