Home income plans

With a home income plan, equity is released through a lifetime mortgage or a home reversion plan and is automatically invested into an annuity that is built into the plan, to generate an income for life. A cash lump sum may be available in addition to an income, but the amount may be restricted.

An annuity is a plan that guarantees a series of payments in exchange for a cash lump sum. The income you receive will depend on prevailing annuity rates, your age at the outset and your gender.

Advantages and disadvantages of  home income plans

The advantages and disadvantages of home income plans largely depend on whether the money is released through a lifetime mortgage or a reversion plan, however annuities have their own set of pros and cons:

Advantages of an annuity

• A lifetime annuity guarantees that the income will be paid for as long as you live
• Income can usually be taken on a level or increasing amount each year
• With a home income plan annuity, you can usually get a higher income than would be payable from a stand alone annuity

Disadvantages of an annuity

• Annuity rates fall at times of low interest rates.  For this reason lifetime mortgages and home reversion plans have been the more popular choice in recent years
• Annuities cannot be reversed once purchased
• You can lose out by taking a lifetime income if you were to die soon after the plan is completed, unless the plan includes protection against this