Coping with the crunch: the over-50s

If you haven't, says Tom McPhail of Hargreaves Lansdown, you face a tough choice: 'You could keep your money in the stock market in the hope that this will be a short downturn. Or you could have to look at deferring your retirement for another couple of years. This could be difficult, particularly if your employer is saying your time is up.'

If you do have to retire imminently, there are several options to reduce damage to your future financial wellbeing, says McPhail. Rather than buying an annuity, you could opt for income drawdown (usually only available for those with £50,000 or more in their pension fund, and more suitable for those with £100,000-plus). 'But try to take as small an income as possible, because drawing a big income from a fund that is falling in value can do a lot of damage very quickly,' he warns.

Alternatively, you could take your 25 per cent tax-free cash, stick it in a savings account, live off it for the next five years and leave the rest invested until the market recovers. Or take a smaller amount - say 20 per cent - of your pension fund, one quarter as tax-free cash through an annuity and the rest to provide a small regular income. McPhail says that inflation-linking an annuity now is very expensive: it may be better to opt for a flat rate increase of, say, 3 per cent every year, or a level annuity which pays out the same amount of income until death.

Seventy-plus

Soaring energy and food prices are hitting pensioners hard, taking up a disproportionately large portion of their income. Help the Aged and Friends of the Earth were granted a judicial review, which took place last week, in a bid to force the government to stand by promises made in 2000 to eradicate fuel poverty by 2016 and to eliminate it among vulnerable households by 2010. But a recent report by Age Concern found that more than half of older people are cutting back on essentials such as heating and food. Those on low incomes may qualify for pension credit, housing allowance and council tax benefit. Apply for all three at the same time by calling 0800 009966.

Many people from their seventies onwards will be relying on the value of their home to provide money through equity release to cover long-term care costs . This works well for couples where one partner is entering care but the other needs to carry on living in the home. It does not work for single people, as any scheme will end once they enter a home permanently. Andrea Rozario, director-general of Safe Home Income Plans (ship-ltd.org; 0870 241 6060), which promotes safe equity release schemes, says that increasing numbers of applicants are also using these schemes to pay off debts that have followed them into retirement.

However, in August 2007, Nigel Hare-Scott of equity release firm Home & Capital warned Cash readers that if they wanted to release equity from their homes, they should take action before prices started falling. Now that prices have tumbled, he says applicants are quite prosaic about valuations coming in at up to 30 per cent lower than previously expected, but the important thing now is to choose a scheme which fits the applicant's needs. 'Schemes can be designed to pay out on a monthly basis, or as and when you need money, or to pay out a lump sum,' he says.

If there is not enough equity in an applicant's property to meet their needs, Hare-Scott suggests that if that person has children who are working, they might be able to withdraw equity through a conventional repayment mortgage to help top up funds.

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