Downsizing could free up £112,000 for retirement | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

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Published: 08/09/2017

Downsizing to a smaller property is something many people aspire to in later life, and it could have huge financial benefits, with research from Prudential finding a growing willingness to downsize – and a growing cash reward in the process.

Free up funds

The research found that 47% of respondents aged 55+ plan to downsize to a cheaper property in later life, which means some 3.9 million people could be looking to move to a smaller home in the coming years. They're expecting to release an average of £112,000 in the process, while 11% expect to make more than £200,000 from doing so, a significant sum by anyone's standards.

For some people this could be a necessity, with 13% of respondents admitting that they couldn't afford to retire unless they downsized. Others will simply use the funds to improve their living standards, with 60% of those who expect to raise money from downsizing saying they'll use the money to boost their retirement funds, while 47% will use the cash for travelling.

For others, it's all about passing on the wealth, with 13% wanting to release equity to help their children buy a house and 14% simply giving the cash to their children. However, despite the huge gains that can be made by downsizing, it isn't all about the money, with the main reason for downsizing actually being convenience.

Not all about the money

The research went on to reveal that 74% cited convenience as their primary motivation for downsizing, with the ease of running a smaller home being the main driver. This is compared with 28% who said releasing cash was the main reason, and 34% who said they were downsizing to get a smaller garden.

However, no matter what your reasons may be for considering downsizing, barriers clearly remain, with 38% of respondents believing that the lack of suitable houses available is preventing downsizing from becoming more popular. A further 24% blamed the cost of moving, including things like stamp duty, solicitors' costs and estate agent fees, and 17% said that high house prices are putting people off.

"It is interesting to see that these figures challenge the common theory that 'my house is my pension'," said Vince Smith-Hughes at Prudential. "Although we see a large proportion of those taking equity from their homes to boost their retirement incomes, most people have accepted that the main reason they need to move home in later life is for convenience.

"With the average amount of equity raised likely to be just over £100,000, and with many other demands on this cash – such as helping children, paying off debts and putting money aside to pay for care in the future – it is clear that for most people the best way to fund retirement is through saving as much into a pension as early as possible in their working lives."

What next?

£112,000 may sound like a lot, but as Vince pointed out, it may not go very far in retirement. That's why you need to make sure you've got a suitable pension pot – find out more about why you need a workplace pension, and if you're approaching retirement, see if it's worth considering an annuity.

Want to boost your pension pot even more? Saving into an ISA could be ideal, bringing you tax-free returns that can be put to great use later in life. A stocks & shares version could be worth considering if you're comfortable with a bit of risk, and if you're under 40 and serious about saving for retirement, see if a Lifetime ISA could be for you.


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