For it to be an option, the individual must have sufficient equity within their own residential property. There are limits to the maximum amount that can be released and, depending upon the scheme used, the homeowner may only receive a proportion of the value.

When deciding whether to use equity release rather than take an income from a pension there are a number of considerations:

• equity release will reduce the value of the client’s estate for IHT purposes and may allow them to leave the more IHT efficient pension untouched;
• if the value of the house is less than the available nil rate band, the costs associated with taking an income from the pension tend to be less than those associated with equity release
• the rate of interest associated with the equity release can be very high so individuals may prefer to access their pension initially and then release equity from their house later in retirement; and
• the release of capital may affect the homeowner’s tax position and entitlement to State benefits.