Pensioners cashing in on the value of their homes owe an average of £8,967 in credit card debts, new research* from leading independent equity release adviser Key Retirement Solutions shows.

Its analysis shows one in five over-65 homeowners taking out equity release owe money on plastic with average debts increasing for the over-70s. Customers aged 65-69 owe an average £8,881 while the over-70s are £9,048 in debt.

Key Retirement Solutions, which analysed applications from 3,501 customers in 2009, warns that credit card debt is taking a substantial bite out of pensioner incomes with many over-65s unlikely to ever be able to clear their plastic.

The analysis comes as the Government announced plans, which come into effect in February 2011, to force card firms to clear debts at higher rates of interest first as well as banning rate rises and credit increases for people in financial difficulty and giving customers 60 days to reject rate rises.

Key Retirement’s analysis shows that pensioners making the monthly minimum repayment on a balance of £8,967 at an average 18.8% rate would pay £141 out of average gross pensioner incomes of £16,000.

That equates to 10% of monthly income before tax – but someone only paying the minimum would take 30 years and one month to clear the debt without spending any more on the card.

Bank of England*** figures show credit card lenders wrote off £4.1 billion of credit card debt in 2009 as borrowers defaulted.

Dean Mirfin, Business Development Director at Key Retirement Solutions, said: “Debt is a way of life for a substantial number of people and the over-65s are not immune. Many are perfectly comfortable with owing money on their credit cards and it can be a sensible way of planning for major purchases.

“However the over-65s are more at risk as once they retire they may no longer have the income to service the debt and in many cases to ever clear their credit card balance.

“Many of them do though have substantial wealth tied up in their homes which represents a potential source of income particularly when other sources of retirement income are under pressure from low interest rates and annuity rates.”

Key Retirement Solutions’ Pensioner Property Equity Index shows the over-65s have property wealth of around £765.18 billion after paying off mortgages and gaining from increases in house prices.

Research among its customers shows the average monthly payment on credit card debt is £238. Someone paying that amount would clear their debt within four years and seven months assuming they don’t continue to spend.

Around 48% of the customers it spoke to were aged 65-69 while 52% were aged 70-plus.

For anyone looking to release equity from their home to help ease the financial burden in retirement, key’s independent guide to equity release is the best place to start. This can be obtained by calling 0800 531 6010 or visiting our website https://www.keyrs.co.uk/free-guide where the guide can be downloaded.

Notes to Editors
* Key Retirement Solutions own database of 3,501 customers applying for equity release products in 2009

** http://www.nao.org.uk/whats_new/0809/0809961.aspx

*** http://news.bbc.co.uk/1/hi/business/8543083.stm

Citigate Dewe Rogerson
Phil Anderson/Kevan Reilly/Paul Griffin
0207 282 1031/1096/1041

About Key Retirement Solutions
Founded in 1998 Key Retirement Solutions is the leading independent adviser specialising in equity release. Key Retirement Solutions is a limited company registered in England No 2457440 with its Head Office at Key Retirement Solutions, Harbour House, Portway, Preston, Lancashire, PR2 2PR.Key Retirement Solutions is authorised and regulated by the Financial Services Authority.

10,000th REFERRAL RECEIVED
AVERAGE PAYMENT PER REFERRAL REACHES ALL TIME HIGH OF £755
EXPANSION OF ESTATE PLANNING PROPOSITION
WIN A MINI COOPER REFERRAL INCENTIVE

Key Retirement Solutions, the UK’s leading independent equity release specialist today announces a number of major developments in its referral propositions.

In December of 2009 Key Retirement Solutions achieved a major landmark for equity release, receiving its 10,000th referral. It also paid away to referral partners the highest average case value during 2009 compared to any previous year, having paid out an average of over £750 per completed case (£691 being the previous highest average in 2008).

At the same time as achieving these landmarks the company is expanding further Key Estate Planning, which provides a full estate planning service, incorporating will writing, which includes complex trust arrangements including IHT planning and other trusts, and Lasting Power of Attorney. Until now this service was only provided alongside the equity release proposition for referral partners. Key Retirement Solutions are now expanding the service to accept estate planning referral’s directly to the head office team. This service will be rolled out over the coming weeks to existing and new partners.

Dean Mirfin, Key Retirement Solutions Group Director, said: “The expansion of our referral propositions are central to the continued growth and development of Key Retirement Solutions. In the past two years we have seen continued focus on the area of equity release amongst brokers who wish to share in the revenues available but who do not wish to advise in this area. The same is also true of estate planning. We have in place a simple referral process which now includes a slick and speedy equity release calculator for advisers to use to find out what a referred client could potentially borrow and this has greatly improved conversion rates.

“Those who are sharing the revenues from referring to ourselves are reaping the benefits and we want to take steps to provide even greater focus on equity release into 2010. To this end we are today launching a referral incentive to win a Mini Cooper. We hope this will give that added incentive, as well as the payments average in excess of £750 per case, to those who may not currently be looking at this area. In addition it should give those who already refer to us even greater focus and incentive for the months ahead.”

Winning a Mini Cooper can be as easy as 1, 2, 3. For registering, referral partners receive 1 entry into the prize draw, for referring a client, 2 entries, and if the client proceeds to application a further 3 entries. Existing registered individual partners will automatically receive 1 entry. The incentive runs from January 6th until 30th April and the prize will be presented to the winner in May.

Further details of all referral opportunities and the Mini incentive can be found at www.keypartnerships.net/minipromo.htm, or by calling 0845 12 12 12 8.

Martin Palmer of Friends Provident said that taking a few "simple" steps, Britons can emerge in a strong position for the future.

Writing for Whatinvestment.co.uk, the industry analyst advised consumers to work out how much they have already saved.

Arranging a session with an IFA or a pension provider is the best way to do this, Mr Palmer said.

He added: "To move towards a more financially secure retirement, people over 50 should aim to pay off any unsecured debts and consider over-paying on their mortgage to be debt and mortgage free as quickly as possible.

"Rationalise your monthly outgoings – getting rid of your mortgage is the biggest step to reducing this."

Last year, Whatinvestment.co.uk said that older Britons are increasingly finding their savings coming under pressure during the current economic climate and said that such consumers are turning to equity release as an alternative source of income.

Prime minister Gordon Brown and climate change secretary Ed Miliband launched the boiler scrappage scheme earlier today (January 5th).

Under the new programme, households fitted with G-rated boilers will be able to claim a £400 voucher from the Energy Saving Trust which can be redeemed off the price of a more efficient A-rated boiler.

The scheme has seen some fuel suppliers follow suit with deals of their own.

British Gas has matched the government’s £400 offer meaning savings of £800 on a new boiler.

Phil Bentley, managing director at British Gas, said: "We want to help customers take advantage of the new boiler scrappage scheme, so we’re offering to match the government’s £400 allowance, which means customers can cut a total of £800 from the cost of a new boiler from British Gas.

"As the country’s leading installer of energy-efficient boilers, we know that new boilers help lower fuel bills by as much as £235 a year."

Elderly people are particularly affected by high energy bills as they spend a larger proportion of their income on heating.

This has lead many to turn to pension supplement schemes such as equity release which allows homeowners to boost their income with money drawn from the value of their property assets.

Mr Osborne is also expected to unveil plans to scrap some middle-class benefits.

In the Tory draft manifesto, Mr Osborne is expected to promise reform on "unaffordable" public sector pensions and unveil plans to remove benefits such as child tax credits for those who are better off.

Conservative party leader David Cameron set out the manifesto, saying: "The modern Conservative party has the plans, the ideas, the energy, the people, the unity and the leadership to bring that change."

He added: "We are all in this together, and we know that if we all pull together then this country can have great hope for the future. So let’s face this new year with confidence, optimism and hope – and let’s make 2010 the year for change."

Uncertainty surrounding pensions ahead of the forthcoming general election could see many people turn to additional ways of funding their retirement.

This could boost the popularity of equity release schemes which allow homeowners to supplement their incomes with money drawn against the value of their assets.

Despite price reductions from many energy suppliers, the annual energy bill has increased by 36 per cent compared with the beginning of 2008, according to independent comparison website uSwitch.com.

The average cost per household is now £1,239, an increase of £327.

According to uSwitch, household heating accounts for 42 per cent or £520 of the average annual energy bill, with most of this spend typically accumulated during the winter months.

Elderly people are significantly affected by the rising cost of energy as they use a larger proportion of their income on heating.

Fears over the ability to meet rising annual bills could see many people looking to increase their monthly incomes.

This could lead to a rise in the popularity of equity release schemes which allow homeowners to supplement their pensions with money drawn against the value of their properties.

uSwitch has now issued a ten-point guide to cheaper fuel bills.

Advice includes comparing prices and switching suppliers, paying by direct debit and using online billing.

Customers were also advised to ensure their homes are properly insulated, to cut out any draughts.

Will Marples, an energy expert at uSwitch.com, said: "Rather than sitting back and hoping for further reductions we can all give ourselves a substantial price cut on our energy bills today.

"Moving to dual fuel, paying by direct debit and signing up to an online plan will all help save money."

The paper, entitled Time for Change: Seven proposals to improve DC pension benefits in retirement, outlined policy proposals to remove existing restrictions and enable people to get "maximum value" from their pension savings.

Recommendations in the report include raising the current age requirement for buying an annuity from 75 to 80, encouraging the development of value protection annuities, and addressing the issue of stranded pots by "harmonising" rules for occupational and contract-based DC pensions.

The ABI also proposed increasing the income allowance for Alternatively Secured Pensions and the introduction plans to encourage married and partnered couples to consider their joint retirement income needs.

Maggie Craig, Acting Director General of the ABI, said: "The UK pensions landscape is undergoing huge change, with the numbers drawing benefits from DC pensions savings in 2010 set to exceed 500,000.

"The good news is that these people can expect to live longer.

However, this improvement brings new pressures, which means the current rules and regulations are not fit for purpose."

Worries over the stability of pensions in the UK could lead to an increase in the popularity of additional retirement funding, such as equity release schemes.

Such plans allow homeowners to increase their incomes with funds drawn from the value of their property assets.

Chancellor Alistair Darling announced earlier this month that the rate will return to 17.5 per cent in the new year after being reduced to 15 per cent in a bid to encourage spending in the UK.

According to RIAS, the over-50s are some of the UK’s biggest consumers, outspending the younger generations by almost 13 per cent each week, equivalent to £21, with the majority of their £179 expenditure going to food, drink, eating out, entertainment and hobbies.

The RIAS research also revealed that the over-50s will be spending £19 a week in VAT next year, compared with £18.52 per week in 2009.

Janet Connor, Managing Director at RIAS, said: "While the 2.5 per cent increase in VAT may not sound like a huge amount, over a year it really does add up and bolsters the already substantial contribution the over-50s make to the UK public purse."

The increase in VAT could see more people struggling to save for their retirement.

In turn, this could lead to an increase in the popularity of alternative funding schemes such as equity release programmes which allow homeowners to supplement their pensions with cash drawn from the value of their properties.