A solution for cash-poor pensioners: a state-run equity-release scheme

Many retirees find themselves short of cash despite owning an expensive house. Merryn Somerset Webb proposes one solution that could benefit everyone.

If you think about the problem inherent in the UK's retired population having too much property and not enough pension, there is an obvious solution: equity release.

People get old and they run out of cash, but as they can't bear the thought of raising that cash by moving, it makes sense to borrow against the house and stay.If you have spent most of your life paying for something, it seems a bit rubbish to have to leave it just when you have the spare time to enjoy it.

But while equity release is a good idea in theory, it often falls down in practice mostly because it offers providers yet another marvellous way to exploit the mathematical incompetence of the UK population one they grasp with both hands.

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So here's a thought. The government has made it clear that it has one policy and one policy only: making sure that we get artificial growth via seemingly absurd policies the only result of which is to push house prices up. So, why not solve a whole load of problems at once by introducing some kind of state home reversion policy? Anyone who can't afford to live, or perhaps to pay for care, can borrow against the value of their home from the government at a reasonable rate of interest.

On their death, the home reverts to the state, which can then either keep it (solving the shortage of social housing problem too) or sell it back into the market, taking any profit their manipulated market offers up along the way.

This wouldn't be an entirely new system. Already, all sorts of councils offer deferred payment schemes with people's property as the security when they need to go into long-term care. Under this system, your house is valued but not sold, the council pays your care fees, and you then pay back the debt on the sale of your house.

It isn't officially equity release, but the effect is the same. A national scheme along these lines that could be offered to people whether they are going into care or not might be worth thinking about.

Merryn Somerset Webb

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.