Tag Archives: fca

There are a huge number of people in the UK who are reaching retirement age but finding that their retirement income together with any savings are insufficient to enable them to maintain a reasonable standard of living. One option open to a homeowner may be to arrange to raise funds by way of an Equity Release scheme.

Apparently, the Financial Conduct Authority (FCA) is going to be looking into how Equity Release schemes can be used more for the benefit of the ageing population as part of a review of the mortgage industry. For instance, could more people release some of the capital in their property as a lump sum or receive a gradual income through the equity in their homes? The review is due to commence in the early part of 2016.

Equity Release schemes are relatively straightforward lending products that have become increasingly popular amongst retired people in recent years. If someone owns their property outright and is a minimum age of 55/60 then they may be able to borrow money against the security of their home and use the money to provide additional financial support in retirement.

The two most common types of Equity Release schemes for the elderly are a lifetime mortgage and a home reversion plan. The former involves borrowing money against how much the house is worth and the other is where either all or a part of the property is sold to a home reversion company who provide the occupant with a tax-free lump sum.

Interest is added to the amount borrowed that is repaid once the property is sold typically following the death of the homeowner. Obviously, the amount of interest will accrue and could, along with the capital raised, potentially be a significant sum by the time the property is sold.  You may wish to obtain advice about such schemes before considering entering into one.