A Warning About Annuities

WARNING With annuities, you hand over a lump sum and in return get an income. You can't normally get your capital back as a lump sum. The size of the income you get depends on your sex and your age. Women have a greater life expectancy than men, so they get less income than a man of the same age. The older you are, the higher the income. Home income plans are a gamble: if you die shortly after taking out the plan, you'll have had very little of the income, but the whole of the loan has still to be repaid. But the plans can work to your advantage, as in the case of twins who were 100 years old in 1987. They'd borrowed £40,000 through a home income plan in 1973. Because of their longevity they've received far more than that in income.

TIP - Age Concern produces a useful fact sheet (Number giving details of home income plans - send a large SAE to the address below. I t also produces a booklet, Using your home as capital, price £4.95. Both can be obtained from:

Age Concern

60 Pitcairn Road, Mitcham, Surrey CR4 3LL


Income from a home income plan may reduce the amount of any state benefits that you're getting.

For more information about Banks

Home Income Plans

Where from? Some insurance companies and some building societies.

How they work You take out a mortgage on your home (there must be no outstanding mortgage already) and use it to buy an annuity - a form of investment which provides you with a regular income for life. You can borrow between 60 and 80 per cent of the value of your home, depending on the scheme. The older you are when you take out the plan, the higher the income you'll get. The plan provider deducts interest (after allowing for tax relief) on the mortgage from the income and hands you the rest. Both the interest on the loan... see: Home Income Plans

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