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Property undervalued for retirement

Property undervalued for retirement

Category: Retirement
26/02/2018

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Homeowners may be at risk of missing out on some crucial retirement income by forgetting about their property, as the number of people who don't know whether their property is worth more than their pension has increased substantially, from 5% last year to 22% today.

This is according to research from Retirement Advantage, which reveals that while 52% of people believe their property is worth more than their pension, this marks a decrease from the 63% who said so a year ago. Considering the average house price currently stands at £226,000 across the UK, whereas the average pension pot size is £50,000, there's clearly a disconnect between perception and reality for a lot of people.

Even if you manage to downsize from the average home to one which is worth a quarter less, you could gain more than the current average pension pot's worth of funds. And if you don't want to move, there's still equity release to consider.

Yet 42% ranked their workplace or personal pension as the asset they expected to provide them with the most financial support in retirement, compared with just 19% who ranked property as their number one. And the numbers were even worse for those who are aged 55 or over, as 18% backed the state pension while a lesser 17% chose property wealth.

"The move away from defined benefit pension schemes and a decade of stagnant wage growth has left a generation of people facing a retirement savings gap," Alice Watson, head of Product and Marketing at Retirement Advantage, commented. "And yet we still find evidence of a collective blind spot when it comes to property supporting retirement income."

She suggests that part of the reason why people don't look at their home as a source of equity is because they are too emotionally invested in it. Yet the two outlooks shouldn't be mutually exclusive; it's perfectly possible to release equity and still leave an inheritance for your loved ones, while staying in the home you love.

A good step in the right direction would be to discuss retirement finances with your children, which currently only 13% do. Indeed, 29% of over-55s don't discuss their retirement finances with any of their family members at all, not even their spouses. This could cause a lot of problems down the line, with both children and spouses likely to be affected if you can't cover your own retirement or something unexpected happens.

What next?

Start by talking to people about how you're going to pay for retirement, and consider equity release as an option to supplement your later life income

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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