Equity release can compensate for a reduced widow’s pension
Losing a life partner and subsequent income worries can make retirement a time of real challenge
Many widows today, whose husbands worked and saved hard for their retirement, are now finding themselves having to survive on a depleted income and rely on State benefits alone. A Widow’s Pension is a pension payable to a widow aged 45 or over when their husband dies and applies to deaths that took place before April 9 2001.
Some widows may have to consider moving from their homes into something smaller, but this is not a comfortable solution for many. It can be a huge wrench to leave the environment where a family was raised and which may contain so many happy memories.
Failure to shop around for the best annuity can reduce income
One cause of this depleted income lies with annuities. An annuity is an investment that produces a guaranteed lifetime income - an arrangement whereby the customer transfers property to another in return for the other's promise to make periodic payments to the customer in fixed amounts for the rest of their life. Those with personal pensions are obliged to use much of their pension fund to buy an annuity. An investigation completed by the FSA found that 40 per cent of the insurers are still failing to alert their customers who are approaching retirement that they can purchase their annuity from any authorised provider and not just from the insurance company who managed their pension when they were working.
However, there are a number of ways that widows can potentially increase income and stay in the family home
Equity release could be a saving grace for those who are not getting the funds they need from their Widow’s Pension. An equity release product allows the customer access to a large lump sum of money or to arrange for smaller sums to be available over a period of time by releasing some of the equity tied up in their property. There are also home reversion plans which allow the customer to keep a proportion of the property value back for their heirs or for further retirement planning. Whichever choice the customer makes, the money they raise can be used for whatever they choose, be it for home improvements, a holiday or just to help with the escalating cost of living.
If considering equity release on your home, do take proper financial advice
Anyone considering equity release should get advice from an FSA registered equity release financial adviser, to ensure that they are well advised on all the equity release products available and the likely impact each may have on any State benefits or other circumstances, which may affect their overall income.