A recent report has called on the Government to create a state-run “Equity Bank” to help elderly people on lower incomes generate extra income from their property.
The report, from the International Longevity Centre – UK (ILC-UK), proposes that after receiving the appropriate financial advice, an individual sells a portion of their home to the state in return for a guaranteed lifetime income.
Upon death the property would be sold, the debt to the state paid and any remaining value passed to the person’s estate. The Bank would be carefully targeted at older retirees who own their own homes and live alone but are income poor.
The report points out that housing equity owned by the population aged 65+ is estimated to be worth around £1.4 trillion or, £122,000 per person on average. In households with a deceased partner, home equity could be twice this average. Around 40,000 new people each year could benefit from the scheme.
“The value stored in people’s homes could be used to provide greater income in old age and improve living standards,” explained Baroness Sally Greengross, Chief Executive of ILC-UK.
“Whilst some people will choose to downsize, there is a large group of older people on low incomes for whom moving house would be impractical but for whom a higher income could significantly help improve their day to day life,” she said.
“Traditional equity release schemes may not work for this group of the population and new ideas, like the Equity Bank, deserve serious consideration from Government and the financial services industry,” she added.
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