Pensioners release equity to avoid poverty

TENS of thousands of pensioners will be forced to release equity from their homes to prevent them falling below the poverty line over the next three years.

More than 150,000 elderly homeowners are expected to release £9.32bn of equity from their properties, with a further 750,000 considering an equity release scheme.

A report by Professor Merlin Stone of the Bristol Business School around one in five pensioners are living below the poverty line despite having thousands tied up in their homes.

He said the financial services industry had so far failed to adequately support the elderly with equity release schemes. Few high street lenders offer equity release products, leaving the market to a handful of smaller lenders.

Professor Stone said: 'Retired people deserve a better deal from the financial services industry. The schemes currently on offer are not flexible enough to meet the pent-up demand.'

In his report, Professor Stone recommends lenders offer more flexible schemes that allow pensioners to move property and give them better advice on how they can invest equity released from their home.

Martin Neal, managing director of the company behind the scheme, Economic Lifestyle, said: 'Property is the biggest asset for most of us and the most obvious way for retired people to tackle their financial problems is to make it easier for them to access this wealth.

'There needs to be recognition that one solution does not fit all and that needs change for retired people as they get older.'

If the processes involved were made more straightforward and there were more options available, a further 301,000 retired people would release £11.41bn, the report claims.

Another 1.1m retired people would also be tempted to tap into the wealth tied up in their homes.According to industry body SHIP, equity release lenders wrote £1.19bn worth of new business in 2004. The Actuaries Profession estimates the industry could grow to £5bn within the next two years.