Equity release could bridge the gap for retirees

Many people of retirement age are finding themselves less comfortably provided for than they thought they would be. There are many reasons for this, including the recent economic downturn and the simple fact that people are living longer.

According to The Telegraph, annuity rates plunged to the lowest level in 20 years last week. In 1990, people retiring with a pension fund of £100,000 would have been able to buy a fixed income for life of £15,600 a year, it claims. However, people with the same fund today would receive an annual income of just £5,860.

As a result, many are either facing more years in the workplace or will have to accept that they cannot maintain the lifestyle they had hoped for. However, having consulted a number of experts, The Telegraph has come up with some practical ways for pensioners to make the best of what they have.

One suggestion is that people should protect their pension funds from sudden market falls by moving into safer cash and fixed-interest investments. “Gambling on stock market recovery is a risky strategy,” the report says.

The second recommendation is that pensioners should consider alternatives to total retirement, for example working part-time or doing consultancy work.

The third piece of advice is to look at the full range of annuity products available as many offer greater flexibility that traditional annuities, which lock people into a fixed, guaranteed rate for life.

Finally, it suggests people of retirement look beyond the typical pension options, taking into account any other savings and investments they may have tucked away. “Don’t ignore your property,” the report says. “Even if we do suffer a ‘double-dip’ in house prices, many retired people who got onto the property ladder decades ago are still sitting on substantial amounts of property equity, which can be accessed via an equity release scheme.”