A report published today has called on the Government to launch its own equity release scheme, offering additional retirement income for pensioners.
The report from Cass Business School and the International Longevity Centre says equity release backed by the Government could help asset-rich but cash-poor consumers.
It calls for the creation of a ‘UK Equity Bank’, proving annuity income in retirement in exchange for the Government taking a stake in retirees’ property.
The report says: “Our proposal is aimed at a sizeable group of older home owners who have relatively small incomes of, say, £10,000 per annum or less.”
It says the debt to the state would be expressed as a percentage of the property value, to be repaid upon death, and proposes the annuity rate be set by Government and inflation-linked.
It notes the potential strain the service could have on Government finance and says the policy should be phased in, starting with over-75s.
Authors Les Mayhew and David Smith acknowledge the scheme could not assist pensioners with limited assets.
But they argue it would allow more people to stay in their homes or finance care costs without the need to sell property.
The report also accepts tax rules do not always make equity release an appealing option.
Key Retirement Solutions director Dean Mirfin says: “The UK Equity Bank is a good debating point and positive for the equity release market as it highlights the wealth pensioners have in their homes and how it could be used for retirement income. It also highlights the issues and complexities of the relationship around benefits and taxation.
“But many taxpayers I am sure will find it very hard to understand why the Government should start offering loans against people’s houses when there is already a well-established, well regulated, and successful and growing private industry enabling homeowners to release equity from their homes.
“Lobbying would be better directed at reviewing the approach to taxation and benefits for those releasing equity.”