Safe income for the old

IN RECENT weeks, MPs have been investigating how 10,000 old people came to lose tens of thousands of pounds as a result of being persuaded to buy home-income plans in the late 1980s.

These plans, specifically designed for older people, release home equity to provide income or lump sums. Pensioners were promised a future free of worries if they took out roll-up or investment bond-based loans on their houses to finance the equity release.

In reality, the opposite was often true. Old people up and down the country have had their final years blighted by uncontrollable debt, and the prospect of gradually losing the remaining equity in their house.

The financial advisers who sold these plans have gone out of business and will not be reimbursing their clients. Some victims who invested before the establishment of the Investors Compensation Scheme in 1988 have been left with no compensation. Others have been offered only limited amounts from the ICS and are taking their battle for a better deal to the House of Lords.

Popularity has waned as the public and independent financial advisers have found it difficult to distinguish between safe and unsafe plans. In spite of the bad publicity that now surrounds home-income plans, some relatively secure ones do exist.

Betty Powell, head of public affairs of the Securities and Investment Board, says people should not get into anything they do not understand. "If in any doubt, they should take a solicitor along to advise and share responsibility for the decision."

Neither the SIB nor other regulating bodies make specific company recommendations. Age Concern says it finds it easier to recommend plan providers if they belong to the Safe Home Income Plan campaign (Ship).

Ship is a self-regulatory group that insists its members offer fair, simple and complete presentations of the facts, freedom to move house, and fully secure income payments. It also insists that the customer's own solicitor oversee the transaction.

Age Concern stresses that older home owners should explore other options such as moving to a lower value house, rented or sheltered accommodation - before opting for an income or lump-sum release plan.

There are two relatively safe home income plans - mortgage annuity schemes and home reversion schemes. Both usually involve selling the property on the death of the individual or the later surviving partner, so it is advisable to discuss the details with any heirs. Individuals must be in their late sixties, and the combined age of a couple has to be between 140 and 150.

With mortgage annuity schemes, borrowers raise an interest-only loan on their property, repayable at death, of up to £30,000 (more is permitted in some circumstances). This loan is used to purchase an annuity, providing a regular income, as well as interest payments, which attract tax relief at 25 per cent.

Home reversion schemes, on the other hand, involve actually selling part or all of a home to the reversion company at a discount. The discount is heavy - ranging between 50 and 70 per cent, depending on the age of the individual.

q Free Age Concern fact sheets are available from Astral House, 1,268 London Road, London SW16 4ER. Ship is contactable through Hinton and Wild (Home Plans) Ltd, 374/378 Ewell Road, Surbiton, Surrey KT6 7BB.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific