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New research has revealed that nearly half (47%) of 35-54-year-olds (known as Generation X) are planning to use property to help finance their retirement – including people who have yet to take their first step onto the housing ladder. Are you counting on your home to see you through 'til the end?
The research, conducted by the Pensions and Lifetime Savings Association (PLSA), estimates that around 8.3 million people (47% of that generation) will be relying on their property to see them through their retirement. And yet 23% of respondents, an estimated 1.9 million people within this group, do not currently own a property, which suggest that they may be basing their future financial security on what is at present nothing more than a dream.
Of course the younger you are, the more chance you have of making that dream a reality, which is why it's somewhat reassuring that of those aged 35 to 44 who don't yet own a house, 36% believed they will be able to use that asset for retirement, while for those aged 45 to 54 this reduces to 14%. Still, with this latter group only being about 20 years away from retirement and therefore not likely able to completely pay off their mortgage even if they were to buy a house tomorrow, and given that nobody knows what will happen to house price growth in the future, 14% still seems like much too high a percentage.
Further figures reveal that there are certain regional differences in the numbers of Generation Xers who believe they can still buy a house and use it to fund their later life, with the lowest percentage of 2% found in Yorkshire & Humber – this might make it a region full of sensible, cautious people, or simply one that recognises their house prices are not among the top in the country.
The East showed the highest percentage of people willing to gamble their retirement security on being able to buy a property and then live on the added value of it, at 14%, followed by London (13%), which has the highest property prices in the country and (as everywhere else) no guarantee that they'll stay that way over the next couple of decades.
These statistics are all in line with the finding that 54% of Generation X don't think much about retirement income and generally assume that it will all work out in the end, and 51% are too busy worrying about day-to-day living costs to think about their retirement income.
This is exactly why automatic enrolment was introduced, to make sure that people are putting at least something aside for their after-work life. Graham Vidler, director of External Affairs at the PLSA, added: "The majority of Generation X find themselves in the unenviable position of being too young to benefit from generous defined benefit pension schemes and too old to receive the full benefits of automatic enrolment. They need support in understanding how their pension, property and any other savings might top up their state pension to give them a decent income in retirement."
It's hard to save up for a house deposit when you're worried about everyday living costs, and even harder then to think about saving for retirement. If you're still looking to get on the property ladder, make sure you select the most competitive first-time mortgage you can find, so you can at least try to reduce your monthly housing costs as much as possible. Then consider putting any money you save from low monthly mortgage repayments in a pension or savings account, to help you prepare for later life.
If you already own a house, and you've recently remortgaged to make sure your repayments are as low as they can be, remember not to put all your retirement eggs into one basket and ensure your pension savings are doing well too. One important aspect of preparing yourself for the future can be to see exactly what you can get out of your property. Are you willing to sell your home and downsize? Do you know how much that could net you, and if it would be enough? Alternatively, do you know how equity release works, and how that could help with your pension?
Research is key, and you can never start too early. You can use our pensions and retirement guides to get started, and consider seeking independent financial advice on your pension plans to see what's possible.
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