Government must work with financial services to ensure housing equity can be released "without excessive charges or risk" and improve consumer confidence, a House of Lords committee has urged.
The committee said people should be encouraged to use assets such as housing wealth to support retirement incomes and pay for care.
This is one of the key findings from the committee's report which warns the government is "woefully" unprepared for the impact of increasing life expectancy on UK society, retirement incomes and public services.
According to the committee's projections, there will be 51% more people aged 65 in England in 2030 compared to 2010, with 101% more people aged 85 and over.
However, 10.7 million people in Great Britain can expect inadequate retirement incomes.
While many older people have seen the value of their homes increase considerably, they have not viewed this as a solution to the financial challenges of living longer in retirement. However, while equity release schemes exist, they are little used, the report finds.
The report also said it does not seem fair to expect today's younger taxpayers to pay more for the increased costs of an older society while asset-rich older people (and their children) are protected. For this reason an effective equity release market to unlock the housing assets held by older people is important.
The committee also recommended government should keep people better informed about healthy life expectancies, pension projections, the likelihood of needing social care and its cost, and how best to use their own assets.
The government elected in 2015 should establish two commissions, one to work with employers and financial services providers to examine how to improve pensions, savings and equity release, and one to address the the health and social care system, the report concluded.
Baroness Greengross, chief executive of the International Longevity Centre - UK said: "There is a role not just for government and individuals, but also for the private sector. The financial services industry must respond better to the challenges of ageing. The market failure highlighted by the committee cannot continue.
"It is clear that parts of the industry want to serve this growing market. Government must create the right conditions for the financial services industry to thrive and deliver products and services to help us manage as we age."
Claire Barker, chairman of the Equity Release Solicitors Alliance (ERSA) says: "It is equally important that government seeks to engage with the equity release industry and the network of specialist solicitors, advisers and providers that can draw on countless years of expertise to best advise homeowners.
"By building on the specialist knowledge of those in the industry, the government can play a positive role both to educate older people around the options available to them, but also to reduce some of the burden on itself of funding retirement for the ever increasing number of people without adequate means to support themselves through their later years."
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