Britain’s over 60s approaching retirement plan to boost their pensions with some of the cash locked in the value of their homes.
This group own a quarter – nearly £1 trillion – of the nation’s property wealth of just over £4 trillion.
Almost 250,000 have already unlocked cash from their homes in the past year as part of their plan to make their retirement more affordable.
Two-thirds have taken money as equity release, while the rest have downsized to save money.
Many have spent the money on lavish holidays, a new car or buying luxuries.
Alternative retirement funding
Others have paid off mortgages or debts, while 38% will add some pep to their retirement finances and 4% are putting a sum aside for care costs later in life.
The figures come from a study by financial services firm LV= looking at how the over 60s intend to fund their retirements with a property pension.
Releasing equity is fuelled by house price increases and the fact that 75% of over 60s are mortgage free with a home worth an average £272,000. Another 8% also own a second home, says the report.
Low interest rates on savings are also pushing the over 60s to look at alternative ways of funding their retirement, adds the report.
However, as many as 19% of over 60s who have saved too little while working want to top up their pensions by releasing equity in their homes.
The financial provider predicts equity release for homeowners will have more financial impact than the new easy access pension rules starting in April 2015.
“The average pension is worth a little more than £30,000, which will not go far towards funding a comfortable retirement,” said Richard Rowney, the firm’s pensions manager.
“Its likely property and the equity locked in home values will play more of part in retirement planning as many over 60s have a lot of money in property that they will need for topping up their pension and care fees.”
Demand for equity release has surged by 36% this year as savers look for alternative ways to finance their retirement when investments have suffered from poor interest rates and sales of under yielding annuities have slumped.
“Someone who has lived in a property for a long time is likely to be sitting on an asset that far outweighs the worth of their pension,” said Rowney.
“It makes sense to make life more comfortable by releasing some of this cash.”