So you think you can turn your home into cash ...

Equity-release schemes let you free the value locked up in your bricks and mortar and enjoy a comfortable retirement. Or so they say. Sam Dunn investigates
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The Independent Online

But it has also been touted as part of the solution to the UK's pensions crisis and a lifeline for "cash-poor, property-rich" pensioners.

Step forward equity release, a financial product generating more than £1bn a year. Its growth has been so explosive that Adair Turner, chairman of the Pensions Commission, is expected to make reference to it when he reports in November with recommendations to plug the £57bn savings gap between what Britons save now and what they will need to have a decent standard of living in retirement.

In principle, it's a plan targeted at today's retired population - or those, aged at least 60, who will stop working soon - that aims to enrich people's later life by tapping into the wealth tied up in their home.

In practice, it's an expensive and complex product sold by advisers that could double your debt in a decade and, particularly with older schemes, leave little for your children in an estate.

Reliant on a buoyant housing market, equity release comes in two forms: a lifetime mortgage or a home-reversion plan. The former - regulated by the Financial Services Authority (FSA) - uses your home as security for a loan that's repaid (with high interest rolled up and added) when you die, or go into care, and the house is sold.

With a (currently) unregulated reversion plan, you sell a chunk of your home for cash, usually at a discount. On your death, the sale of the property reimburses the investment company and leaves the rest for your heirs.

A score of mainstream lenders, including Norwich Union and Abbey, already offer more than 40 variations of the schemes, and their number is expected to swell over the coming years. It's easy to see why: by 2008, industry estimates put the market size at more than £6bn.

With an eye on this, Prudential is about to launch what it calls a "next generation" lifetime mortgage. It says this will be cheaper, more competitive and let consumers "draw down" cash as needed. So instead of paying interest on one huge sum borrowed at the outset, you pay it only on what you've borrowed so far.

Plenty of warnings have been fired, however. An FSA "mystery shopper" exercise in May found that some financial advisers risked mis-selling the prod- ucts either through ignorance or by recommending that a slice of their customer's released cash be put in a second, separate product - to earn more commission for themselves.

"A lot have been scared off by the [danger] of mis-selling and are apprehensive," says Dean Mirfin of specialist provider Key Retirement Solutions.

Hargreaves Lansdown, one of the UK's biggest independent financial advisers (IFAs), recently decided against offering equity release because of the costs to consumers and risks to itself.

Consumer body Which? has strong reservations, although it welcomes the flexibility introduced by Prudential. It is to compile an exhaustive list of equity- release plans to let consumers compare them.

"Some are expensive and inflexible; [with a lifetime mortgage], you're taking out a loan at a rate way above a normal deal," says Teresa Fritz, a senior policy adviser at Which? "As for home-reversion plans, they make me shudder. You can't have two types of product, one regulated and the other not."

Much concern turns on the size of the debts that can swiftly be run up.

For example, with a lifetime mortgage, the amount of cash released from your home depends on the property's value and your

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