Millions of pensioners and those approaching retirement age are now facing a peculiar dilemma: they own a property, which in many cases is worth several tens or even hundreds of thousands of pounds; and, their pension has fallen in value and thus fails to secure the quality of life for which they had planned.

The combination of longer life expectancy, increased taxes on pension funds and falling market returns and annuity rates means this situation will affect many more pensioners as they retire in the coming years. Only 10 years ago, a person retiring with a pension fund of £100k would have expected an income of over £15k pa compared to today when they would probably get nearer £8k pa.

Many people face genuine hardship. And even for those who are relatively better off, finding the cash for regular holidays, home improvements or the much-needed new car is a problem. Yet, in many cases the value of their home is substantial indeed and continues to increase significantly each year.

With the average house in the UK now worth over £100k (compared with £25k in 1980), this situation is frustrating and slightly ludicrous.

The solution – Equity Release

At last (it seems!), insurance and investment companies have taken account of the fact that property has proved to be a sound long-term investment. They have recently developed a range of products that enable pensioners to release (part of) the wealth tied up in their homes while still retaining the lifelong right to live in them. Most of the schemes will in effect lend you a portion of the value of your home in exchange for a share of it when you die. This enables you to benefit by releasing capital (cash) without you having to move home or sell up.

Not all schemes are the same and suitability will depend on a range of factors including age, health and family circumstances. Some schemes will pay a lump sum and others will pay an income for life in the form of an annuity.