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An Englishman’s home is his pension: 3.9 million over 50s plan to use their property wealth to fund retirement

Posted in: Research

One in five (19%) over 50s are relying on income from property to fund their retirement, according to new research from OneFamily.

  • 3.9 million[i] (19%) over 50s plan to use some of their property wealth to fund their retirement – as they downsize, make buy-to-let investments and unlock the capital in their homes through lifetime mortgages
  • The UK’s over 50s who haven’t already used equity release, are planning to access £37 billion from lifetime mortgages as they take advantage of the equity in their homes at some point, according to OneFamily internal data
  • Property increasingly playing an important role in later years with one in three over 50s saying their pension will not be enough for them to live on
  • A quarter (26%) of over 50s who plan to use their property for retirement say it is a more reliable investment than pensions
  • Property prices have increased by 300%[ii] over the last 25 years, resulting in many over 50s benefiting from large amounts of equity in their home

One in five (19%) over 50s are relying on income from property to fund their retirement, according to new research from OneFamily. This increasing trend is being driven as a result of soaring property prices over the last 20 years, as well as decreasing pension pots and longer retirements. The UK’s over 50s have particularly benefitted from increasing property prices, now owning an estimated £2.3 trillion of the nation’s total £4 trillion property wealth[i].

The rise of property

With house prices having rocketed by over 300% in the last 25 years and the average homeowner over 50 owning a home worth over £225,000[ii], the number of over 50s using property is set to increase. While currently one in seven (15%) retirees use property to contribute towards their income, this is set to increase to one in five (22%) over the next decade.

The most common ways people will use property to fund their retirement[iii] include a buy-to-let investment, which will account for 33% of the retirement income for those planning to do it. 1.8 million properties will be sold as over 50s downsize, accounting for 28% of the retirement income for those planning to do it. And the UK’s over 50s will access an estimated £37 billion by taking out lifetime mortgages, according to OneFamily internal data[iv]. On average, a lifetime mortgage is taken out for just over £90,000[v] and over 50s planning to do it at some point estimate it will account for 28% of their retirement income.

Property reliability

This reliance on property over pensions can be put down in part to people’s perceptions that investing in bricks and mortar is a better bet than pensions. Over a quarter (26%) of over 50s who have or plan to use property to fund their retirement say that property investments are more reliable than pensions, 27% say their property is worth more for their retirement than their pension, and 15% say pensions simply can’t be relied upon.

Advice provides the answers

Despite the number of over 50s planning to use property to fund their retirement, the research revealed that many people may not have fully explored the options available to them when planning their finances for retirement. Only 37% of over 50s have or plan to consult professional financial advice, despite planning income in retirement being one of life’s most important financial milestones. However, of those that had used financial advice, the vast majority (84%) felt it was useful or essential to their financial planning, particularly when it came to considering different products, such as lifetime mortgages or enhanced annuities, which they otherwise would not have considered (46%).

Nici Audhlam-Gardiner, Managing Director at OneFamily, commented:

“It’s clear from the research that homeowners are seeing their property as a cash cow to fund their retirement, and with the dramatic house price rises we have seen, investing in property seems like a wise option. This is particularly true as we see income from pensions, both state and otherwise, beginning to decrease. Those not taking advice may often not realise that as well as downsizing there are other options to fund your later years, whilst saying in your forever home. We’d urge homeowners approaching retirement to consider all the options open to them, and speak to a financial adviser, as how you fund retirement is one of the most important financial decisions you will ever make.

“To help over 55s considering taking out a lifetime mortgage we have launched OneFamily Advice. Customers will pay an extremely cost-effective fee of just £500 for the service; £250 of which is paid at the point the mortgage application goes in, and £250 when the mortgage is finalised.

“The service can be accessed online and via the phone, meaning no home visits are necessary, and it is totally flexible, customers can go as quickly or slowly as they wish in making a decision and not feel under pressure.”

[i]From a nationally represented survey, 24% of Brits are over 50 and retired equating to 12,540,957, and 18% are over 50 and working equating to 9,334,609. Using these figures, 22% of those over 50 and working will use property and 15% of those retired will use property equating to: 3,984,545 across the UK.
[ii] Land Registry
[i] Office for National Statistics, Survey of Wealth & Assets
[ii] Office for National Statistics, Survey of Wealth & Assets
[iii] Out of all over 50s one in ten (10%) plan to downsize, 4% will use income from a buy to let and 3% will take out a lifetime mortgage
[iv] 2.76% of over 50s plan to use equity release at some point which accounts for 664,675 of the 24,046,984 over 50s in the UK. This translates to 410,525 UK properties (as there are 1.62 persons per household in this age group). 410,525 x £90,257 (the average OneFamily Lifetime Mortgage payment)= £37 billion. Please note this is a UK average and payments may vary depending on the equity in people’s homes, their home value etc.
[v] Based on OneFamily internal data, specifically the average amount loaned on its lifetime mortgage products