With a home income plan, equity is released through a lifetime mortgage or a home reversion plan. It 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.

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 

• 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 standalone annuity.
• You may be able to take some lump sum in addition to the annuity.
• The older you are, the higher the income.
• As interest is repaid automatically, the reduction in the home’s value is minimised.