28th June 2018

A report from Key Retirement has shown that approximately 30 retired homeowners give money released from their home to relatives each day and these ‘financial gifts’ are shown to be the fastest-growing reason behind Equity Release. Over the past year, the number of people giving Equity Release money away to relatives has grown by 4%.

The reasons for giving financial gifts

The average age for accessing equity has fallen from 72 to 71, with many looking to help their children or grandchildren to get ahead in life.

For the younger generations receiving the money, this means they can afford:

  • Mortgage deposits
  • Education
  • Debt repayment
  • New business ventures
  • Life events, such as marriage and divorce
  • Leisure activities, including holidays

For those choosing to give money away, the benefits include:

  • Being able to help children/grandchildren get a head start in life
  • Being able to see the improvement in lifestyle, rather than waiting to leave the money as inheritance
  • Potentially being able to influence how the money is used

Is Equity Release the best way to gift money to your children or grandchildren?

That depends on your circumstances and reason for doing so. It is wise to talk to a financial adviser before making any permanent changes to your finances, as there are many factors to consider before committing to Equity Release, such as:

  • Alternative options: Equity Release should not be thought of as an easy, or convenient way to access money. In fact, it is usually used as a ‘last resort’ for those who have no other way to increase their current capital.

    Before committing to Equity release, consider other options, including downsizing, which may fit your lifestyle better in later life anyway, or making an early withdrawal from your pension.

  • Reasons for accessing it: Releasing equity from your home is a big decision which will potentially affect you and you family in the future, so make sure that your reasons for doing it justify the size of the commitment.
  • The long-term effects for both you and your family: Equity Release usually involves an agreement to repay the money, or pass over the ownership of the property, after you die. That means, if you were planning to leave your home as inheritance, or have limited personal wealth, you may have to make compromises.
  • How it ties in with your other plans: If you are planning to move into a smaller home, for example, then selling your current one and using any leftover equity to give your loved ones a hand up will make sense. However, if you plan to leave your home as inheritance, it may be better to find other ways to gift spare cash to younger generations.

A note about Equity Release:  For most people, Equity Release is unlikely to be the most suitable solution. It is important to ensure that you have assessed all other options before committing. Talking to an independent financial planner will help you to contextualise your options as part of your long-term financial plan. This could help to bring some much-needed perspective which will reveal whether Equity Release is truly necessary for you.

The value of talking to a financial planner

Talking to someone in the know can help you to see the bigger picture where finances are concerned. It may be that Equity Release is the right option for you and an adviser can help you to find the right way to go about it and put a plan in place to make it all go smoothly. However, if it turns out that there are better options available to you, which fit your needs more effectively, then an independent financial adviser will be able to help you to navigate those, instead.

On top of the experience, qualifications and expertise you can expect from a financial adviser, we can also bridge the communication gap between you and you providers, ensuring that you get the best service and free up your time for the more important things in life, such as helping family.

For more information, or to talk to us about your finances, get in touch with Ben on 0113 262 1242.