Savers looking to boost their retirement cash are looking to equity release or buy to let to solve their financial problems, says a new survey.
Millions of retirement savers without enough money to fund a comfortable retirement plan to ease their plight by releasing money from their homes, according to a study by financial firm Barings.
Around 16% are relying on property profits to spend in their later years – an increase of 3% from last year and the highest number recorded since the survey started in 2009.
That adds up to around 6 million people thinking about equity release or downsizing, while another 1.3 million are considering buy to let or holiday lets as a serious financial option.
In the West Midlands, around 20% of retirement savers want to bolster their pensions with cash from letting property, which is the highest proportion in all the regions of the UK. In Wales, the region with the lowest number of people looking at property pensions, the figure is just 5%.
However, the financial firm is warning that relying on property as a sole source of income from retirement is risky and may leave many retirees lacking the income they need once they have given up work.
Barings spokesman Rod Aldridge said: “Too many people are turning to property to fund their retirement, which is a real worry because of the risks.
“Property is certainly a good asset as part of a diversified investment strategy, but the research suggests too many are relying on property as their only source of income and this could leave them too exposed to fluctuations in values and interest rates.
“The housing market has proved volatile over the years, so basing your retirement finances on a risky foundation is not wise.”
Buy to let and holiday lets are not the only way over 55s are looking to unlock money from property.
Many plan to downsize, which could cause problems in the property market for first-time buyers and young families as cash-rich older buyers look for smaller, cheaper homes.
The study reflects the findings of other recent surveys by financial firms that all found the over 50s propose to release equity from their homes to maintain their standard of living once they have stopped working.
“Basically, this is a sign people have not saved enough in their working lives,” said Aldridge. “Retirement planning is a long-term financial objective and should not be left too late in life.
“People are living longer and will need more cash to eke out over a retirement of 25 years or more. Releasing cash from property is one way of doing this, but retirement saving should be more diversified.”