A fictitious example of an equity release Property Plan
A fictitious example of how a holder of an equity release Property Plan from Retirement Plus could benefit from a change for the better – and how it might work in practice, even when the property price is falling.
Partial Repayment worked example – with the property falling in value
Mr & Mrs Harrison were both aged 69 when they took out an equity release Property Plan from Retirement Plus in January 2007. They released equity of £50,000 in exchange for granting Retirement Plus a starting share of 25.00% of the value of their property, which was then valued at £200,000. The Retirement Plus share of their property (set at the outset of the Plan in 2007) is increasing at a rate of 0.45% per month. To help in their retirement planning the Harrisons have also elected to have a Protected Share of 33.03% built into their equity release plan, to benefit their estate later. Therefore, the Retirement Plus share continues to increase from the initial 25.00% until it reaches the agreed maximum of 66.97% after 18 years and 4 months.
In September 2008, the Harrisons had a large win on the Premium Bonds and decided to enjoy some winter sun in the Mediterranean for a few weeks. They also decided to repay £20,000 to Retirement Plus.
The flexibility of this equity release plan enables a beneficial re-assessment
Retirement Plus then had the property re-valued – which came out at £180,000. The Retirement Plus share in the property at the end of September 2008 is 27.445%. As the property has fallen in value, the original valuation of £200,000 is used to calculate the monetary value of the Retirement Plus share, for the first five years of the Property Plan.
£200,000 x 27.445% = £54,890
The £20,000 payment received from the Harrisons now reduces the value of the Retirement Plus share to £34,890.
The Harrisons gain a larger Protected Share for their estate
£34,890 applied to the new valuation of £180,000 is equal to an adjusted Retirement Plus share of 19.38%. In May 2025 (the date at which the Retirement Plus share reaches its maximum), the Retirement Plus share will be 47.39%, giving Mr and Mrs Harrison an increased Protected Share of 52.61%.