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How do I tackle my State Pension income?

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When you retire, you hope life will be easier. No more commute, no tyranny of the morning alarm, more time to enjoy life. 
 
But to really enjoy your later years, financial security is key. Our new research, however, shows that many are struggling to achieve this. 
 

A problem pension?

Across the UK, retirees are on average having to find more than one-third over what the full basic State Pension pays to live each year1
 
Their costs include everyday essentials; food, clothes, utility bills, plus something some set aside for eating out and entertainment. 

 
The typical weekly bill for a pensioner is £227.50 per person while the full basic State Pension is £168.60 per week, as of tax year 2019/201. It’s a 35% gap.
 
And that worrying gap shows how great a need there is for those in retirement to draw on funds from elsewhere just to get by. Depending on your circumstances, you may have limited options. 
 

What are your options?

If you’ve been fortunate enough to put some cash away, possibly through savings, a personal pension or company scheme, during your working life, you could use that as an income. But that’s not the case for everyone.  
 
Alternatively, a big decision such as downsizing may be a way for you to raise the funds required to cover the shortfall. However, moving home still costs money and you may be leaving happy memories behind; sometimes it’s not as great an option as you’d want. 
 
There are other ways, though. One of them being equity release
 

Another way

Equity release allows you to access some of the tax-free cash tied up in your home. It can be taken out in two main ways, a lifetime mortgage or a home reversion scheme. 
 
With a lifetime mortgage, the most popular form of equity release, you retain full ownership of your property. It’s a loan secured against your property, like a traditional mortgage, meaning you can stay in the home you love.  If you’re over 55 and your home is worth more than £70,000, you can usually release between £10,000 to £100,000 or more, depending on your situation and the lender’s criteria. 
 

What else do you need to know?

With a lifetime mortgage, typically, there are no monthly repayments to make. That means you can enjoy your tax-free cash, spending it however you wish, without adding to your outgoings. The loan, plus roll-up interest is typically paid back through the sale of your home when your plan comes to an end. 
 
You can choose how to receive your cash, too. If you wish, you can take your money in one lump sum. If you have already earmarked how you’re going to spend it, and need it all in one go, then a lump sum could be perfect for you. 
 
Alternatively, there’s also the drawdown option available to you. That’s where you take your cash as and when you need or want it following an initial release. If you know you’ll need some extra money later down the line, a drawdown may be right for you. 
 
As well, a drawdown may lower the cost of your overall equity release plan, as you only pay interest on the money you’ve released. 
 
And if you want to leave an inheritance but are worried that by taking out equity release you won’t be able to, then don’t be. With some plans, you can leave a guaranteed inheritance, meaning those important to you can still be protected when you’re gone. 
 

Where does Key come in?

Before you take equity release, you must first seek advice. That’s where we come in. 

 
At Key, we recommend Equity Release Council approved plans. They come with the no negative equity guarantee, so you can rest assured knowing you’ll never owe more than your home’s worth. 
 
During your first free, no-obligation appointment, one of our expert equity release advisers will talk through your options. And if they don’t believe equity release is right for you, they will tell you. 
 
If it is, our adviser will search the whole of the market to find the most suitable plan for you. Then, during your second appointment, they’ll present a personalised illustration. You’ll know all the facts and your expert adviser will answer any questions you may have. 
 
If you’re happy to proceed, we’ll handle all the paperwork. And after a typical 8-12-week period, your tax-free cash will be released. 
 
It’s then up to you how you spend it.
  • It's easy with Key
  • See how much tax-free cash you could release from your home by using our free equity release calculator.
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What should you consider before taking out equity release?

Our independent, specialist equity release advisers will discuss the options available to you and explain that taking an equity release plan reduces the value of your estate and may affect any means-tested benefits you’re eligible for.
 
A lifetime mortgage is repaid when you, or the last surviving applicant, pass away or move into long-term care. 
 
Key’s initial consultation is free with no obligation to proceed. If you decide to go ahead with an equity release plan, our advice fee – usually 1.99% of the amount released, subject to a minimum of £1,499 – is payable only on completion.

1Key’s Cost of Retirement 2018
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  • Want to know more about how equity release could help you tackle to the poor State Pension? Request your free Key equity release guide today.
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