Equity Release & Long-term Care
Although these areas of advice are totally different, we have grouped them together due to their shared purpose of funding later life expenses.
Firstly equity release. Amongst our European neighbours, we are fairly unique in having such a large proportion of our population as owner occupiers. Although excessive property prices appear to be reducing home ownership, the current trend would have to continue for many years to get to some sort of ‘European’ comparison.
This level of home ownership has many attributes, but does often lead to a disproportionate amount of wealth being invested in housing. For example there are many elderly people, particularly in Cornwall, living in half million pound homes but with a basic state pension as their sole income. These pensioners do have choices. They can stay as they are and accept the low income, they can move and ‘downsize’ and release some funds, they may have children that can assist with the provision of income in order to keep the family estate ‘intact’.
If you find yourself in this situation, and do not wish to accept any of the above options, you may consider Equity Release. A number of years ago such schemes were in their infancy and many were quite simply ‘not fit for purpose’ being very unclear and frequently unfair to the customer. Today, most equity release products operate similarly to a mortgage, with the difference that a monthly payment is not made as the interest ‘rolls-up’ whilst the customer is alive. Some allow the interest to be paid monthly, thereby protecting the equity for inheritance. Others allow equity to be protected at outset guaranteeing a proportion of the property value for the estate to distribute. The options are almost endless, and need to be explored very carefully, as this is usually a once-only decision.
Long-term care provision (LTC) has steadily become a national issue over the past 50 years, primarily due to the success of medical advances, and more particularly the NHS.
It is apparent to all that the post-war baby boom is getting older, and that in the not too distant future, there will be a lower proportion of the population ‘in work’ to fund the services required by retirees.
We have many customers that are happy to leave LTC to chance, hoping that they have protected their wealth, or indeed having insufficient assets for this to be a worry. Equally, we have a number of customers that ‘wish to arrange their own affairs’ and receive the type of care, or go into a home of their choice, if and when that time comes. For these customers there are LTC products that for a (usually large) lump sum, will regularly pay the required sum for care throughout the remainder of the individuals’ life. The objective being to ensure that the money does not ‘run out’ and to protect the remainder of the person’s assets from being used to pay for care. Essentially, these products go a long way to guaranteeing any inheritance does not get eroded beyond certain levels.
Whilst simple in their make-up, such LTC products require very careful consideration with unbiased and independent expert advice to allow an understanding of state provision and means testing practices prevailing in this area.
If LTC or Equity Release are issues which you may find useful, either for yourself or loved ones, please feel free to call, email, or click the ‘contact’ button.