Retired? Asset rich and cash poor? Too much property, not enough pension? Good news. An awful lot of brains are looking into solutions for your problems. I wrote here earlier this week about equity release and how that might or might not help.But I also wrote herelast year about how it might be an idea for the state to step in and offer a version of less-expensive-than-usual equity release to help cover late in life care costs.
I hate the idea of extending our horribly bloated state any further than we have already. But it makes some sense to ease the lives of the elderly letting them briefly borrow against their houses rather than have to go through all the hassle of selling when they are already suffering.
This idea has now been taken a little further by Professor Les Mayhew and David Smith of Cass Business School. They propose, in a report out today, that people should be able to sell a portion of their house to the state in return for a guaranteed lifetime income. Upon their death, the house would be sold, the debt to the state paid, and any remaining value passed to the heirs.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This makes some sense, and marries nicely with my own thoughts from last year although the lifetime income bit will need some thought, given that annuities aren't exactly fashionable at the moment.
But there is a confusing bit in the report for me. It says that the borrowers should not be hit with higher taxes, or suffer the withdrawal of any benefits that they might be already getting. To me, this makes no sense.
Clearly, income created from equity release should not be subject to tax, but there is can of worms in the benefits bit. I have never quite understood why it is that you can own a house outright but still receive benefits paid for by taxpayers many of whom probably don't own a home.
It would make much more sense to me if everyone who owned assets was refused benefits until they had made maximum use of those assets. So surely the beauty of this scheme is that it allows people the dignity of supporting themselves from their houses, without having to actually sell them.
I don't think we should just be offering state-backed equity release to those are so short of pension income they require taxpayer-funded benefit payments. I think we should be insisting on it as the first step in the rollback of the payment of taxpayer-funded welfare to people (asset rich, cash poor) who could actually finance themselves.
If you’d like to find out how much equity you could release from your home, or to find out more about equity release in general, visit our partners, UK Experts Online, for a free report.
-
The top stocks in the FTSE 100After a year of strong returns for the UK’s flagship index, which FTSE 100 stocks have posted the best performance in 2024?
-
A junior ISA could turn your child’s pocket money into thousands of poundsPersuading your child to put their pocket money in a junior ISA might be difficult, but the pennies could quickly grow into pounds – and teach them a valuable lesson about money
-
Our pension system, little-changed since Roman times, needs updatingOpinion The Romans introduced pensions, and we still have a similar system now. But there is one vital difference between Roman times and now that means the system needs updating, says Merryn Somerset Webb.
-
We’re doing well on pensions – but we still need to do betterOpinion Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn Somerset Webb.
-
Older people may own their own home, but the young have better pensionsOpinion UK house prices mean owning a home remains a pipe dream for many young people, but they should have a comfortable retirement, says Merryn Somerset Webb.
-
How to avoid a miserable retirementOpinion The trouble with the UK’s private pension system, says Merryn Somerset Webb, is that it leaves most of us at the mercy of the markets. And the outlook for the markets is miserable.
-
Young investors could bet on NFTs over traditional investmentsOpinion The first batch of child trust funds and Junior Isas are maturing. But young investors could be tempted to bet their proceeds on digital baubles such as NFTs rather than rolling their money over into traditional investments
-
Negative interest rates and the end of free bank accountsOpinion Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK banking system slightly less awful, says Merryn Somerset Webb.
-
Pandemics, politicians and gold-plated pensionsAdvice As more and more people lose their jobs to the pandemic and the lockdowns imposed to deal with it, there’s one bunch of people who won’t have to worry about their future: politicians, with their generous defined-benefits pensions.
-
How the stamp duty holiday is pushing up house pricesOpinion Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb.
