A state-backed equity release scheme should be compulsory for asset rich, cash poor pensioners
A state-backed equity release scheme should be the first step in the rollback of the payment of taxpayer-funded welfare to people who could actually finance themselves.
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.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
-
Will a Santa Rally bring festive cheer to investor portfolios this year?
Investors will be hoping for a seasonal stock market boost in December
By Marc Shoffman Published
-
ChatGPT turns two: how has it impacted markets?
Two years on from ChatGPT’s explosive launch into the public sphere, we assess the impact that it has had on stock markets and the world of technology
By Dan McEvoy Published
-
Our pension system, little-changed since Roman times, needs updating
Opinion 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.
By Merryn Somerset Webb Published
-
We’re doing well on pensions – but we still need to do better
Opinion 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.
By Merryn Somerset Webb Published
-
Older people may own their own home, but the young have better pensions
Opinion 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.
By Merryn Somerset Webb Published
-
How to avoid a miserable retirement
Opinion 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.
By Merryn Somerset Webb Published
-
Young investors could bet on NFTs over traditional investments
Opinion 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
By Merryn Somerset Webb Published
-
Negative interest rates and the end of free bank accounts
Opinion 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.
By Merryn Somerset Webb Published
-
Pandemics, politicians and gold-plated pensions
Advice 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.
By Merryn Somerset Webb Published
-
How the stamp duty holiday is pushing up house prices
Opinion 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.
By Merryn Somerset Webb Published