Home Business News Is Sunak’s pension Triple Lock Plus pledge for pensioners a lifeline or an election gimmick?

Is Sunak’s pension Triple Lock Plus pledge for pensioners a lifeline or an election gimmick?

29th May 24 10:47 am

The Conservative Party has promised to introduce a tax-free pension allowance via a “Triple Lock Plus,” ensuring it increases by at least 2.5% or matches the highest of earnings or inflation if they win the general election.

Prime Minister Rishi Sunak claims this plan, costing £2.4 billion annually will save pensioners £275 by 2030.

The state pension currently rises by the highest of the following, average earnings, inflation, or the current government’s policy of a guaranteed year on year increase of 2.5%, resulting in an 8.5% increase this April.

While both the Conservatives and Labour Party support the triple lock policy, Labour has criticised the new proposal as lacking credibility.

This election pledge comes at a time when 11% of British retirees have no savings at all, with research from Senior Capital – the UK’s leading later life lending specialist – revealing that amidst the UK’s cost-of-living crisis, almost one in five pensioners (18%) across the UK will be on the poverty line due to not having enough money in their pension funds.

This latest policy announcement also coincides with 600,000 more Brits falling into absolute poverty, with the UK’s overall figure reaching 12 million. Britain’s recessionary climate has also forced 32% of the nation to halt personal contributions to their pension pot, with the number of people being affected by the crisis at nearly 16m.

In light of these findings, Rudy Khaitan, Managing Partner of Senior Capital, highlights that though this pledge is promising news for UK pensioners, equity release loans is by far the superior way to help pensioners access capital to help fund their retirement.

Due to the increase in house prices over the last 50 years, thousands of pensioners now find themselves in a situation of having a significant amount of capital wealth, however, are unable to access this to fund their retirement in the present.

In the early 70s, the average house price stood at a mere £4,975, but according to the latest figures released by the Office for National Statistics (ONS) in July, the average house price has skyrocketed to £290,000. By engaging in equity release, those who are currently struggling have the opportunity to tap into the significant value tied up in their homes, whilst also remaining in them and accessing much-needed funds to alleviate their financial strains amidst the ongoing cost of living challenges.

Reporting on the dire need for methods of accessing capital such as this, further findings from the report have revealed that one in seven pensioners now say that their biggest mental health strain is worrying about funding their retirement.

Subsequent research highlights that many of Britain’s retirees are concerned amidst the cost-of-living crisis, with 22% already reducing or stopping spending on medications and 15%, skipping meals due to their financial situation. Senior Capital’s further data shows that 21% of respondents said that despite paying off their mortgage in full, they were still unable to live fulfilling lives due to not having enough money in their retirement funds.

Managing Partner of Senior Capital, Rudy Khaitan, said, “There is a growing need for new products that offer greater flexibility and choice, particularly in the relatively underserved later-life lending market.

“For pensioners or anyone planning for their retirement, LTV is a critical component when assessing your quality of life during your later years, so it’s vital to investigate a multitude of options that can help ease your financial obligations, as remortgaging may not always be the right option.

“The right equity release mortgage product, particularly those that offer the greatest flexibility through limited prepayment penalties, can be the better option vs a more traditional mortgage when you want to unlock the value in your home without taking on additional monthly repayments.

It allows homeowners to access the equity built up in their property, providing a tax-free lump sum to supplement regular income, whilst still retaining ownership and the right to live in their home for life or until they move into long-term care.

This can be particularly advantageous for those who are retired or have limited income, as it offers financial flexibility and stability without the burden of servicing higher mortgage repayments.

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