Pensioners struggling to make ends meet should only turn to equity release if there is no other option, warns 'Care Options in Retirement', a new Which? essential guide published today.

With rising living costs and the increased cost of long term care, equity release may seem like the answer to financial problems faced by people after retirement.

But equity release schemes can be very expensive, inflexible and leave people with little or no equity in their home, severely limiting their choices later in life. Any money released from these schemes may also affect the amount of means tested benefits people are entitled to.

Major problems arise when borrowers' circumstances change. For example, someone wanting to move to sheltered housing or a retirement home may have to repay some of the loan earlier than expected, potentially leaving too little equity to buy the new property. There can also be high charges for early redemption.

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'Care Options in Retirement' recommends that before turning to equity release people first consider downsizing to a cheaper property, use existing savings, or even borrow from family who can be paid back when the property is eventually sold. People struggling with finances should also check their eligibility for state benefits or grants to assist with the cost of living.

Philip Spiers, Co-author of 'Care Options in Retirement' said: "Equity release might seem like the solution for any pensioners struggling to make ends meet this winter. These schemes provide income while enabling you to stay in your own home.

"However, if your circumstances change you might not have enough money remaining to fund alternative accommodation, and money received through equity release may seriously alter the amount of benefits you are able to collect.

"Anyone considering equity release should do so cautiously - and only after exhausting other options. In all cases, independent, professional advice should always be sought."

(CD/JM)