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
ebooksNow available in paperback
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

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas