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Property and retirement planning

For most people, their largest financial asset is their home so it makes sense to take this into account when planning for retirement, especially in later life.

Although there may be an understandable emotional attachment to the family home which cannot be underestimated, there are good reasons why it may make sense to release some of the equity tied up in your house. These include:

  • Providing additional tax-free income
  • A way to transfer wealth to children and grandchildren
  • Reducing IHT liabilities

Equity Release / Lifetime Mortgages

This is the most popular way of releasing cash from your property - more about Equity Release and Lifetime Mortgages

An equity release loan is an umbrella term to describe plans where equity (that is cash) can be released (paid into your bank account) by a type of mortgage that is secured against your home. However, unlike other mortgages, monthly repayments do not need to be paid as they can be rolled up.

Equity release and retirement planning

Conventional wisdom dictated that many people converted their pensions into cash and income at retirement and supplemented this with income from savings and investments during retirement. In the past, equity release was used to provide additional cash or income in later life when other assets had been spent.

But now savvy advisers and their clients are re-thinking their approach to retirement because three things have happened:

  • Growing numbers of older people are helping the younger generation onto the property ladder
  • Pension freedoms mean that pension pots can be left to the family without any IHT liability
  • IHT is affecting an increasing proportion of older people due to rising property prices

Equity release can be used to release money for capital expenditure, gifts and early inheritance for the younger generation and as a result it could also reduce IHT liabilities.

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