Property now as popular as a pension in retirement
New research from Prudential provides a stark assessment on the state of the nations retirement planning.
Pru reveals that 62% (or an estimated 18 million homeowners) are relying on their property to form part of their retirement income, with over 3.8 million expecting it to provide over half the amount. Rising property prices have made the home so popular. However, the problem for these people is how to access this wealth. Prudential's research reveals that there is a shortfall of £70,000 in the average pension pot. However, if all the baby boomers (who have benefited from spiralling house prices) try to downsize as they retire, it could see a glut of family homes on the market and a potential price decrease. This was the finding of the Prudential/Datamonitor report "Equity Release in the UK". So homeowners wishing to make up the shortfall in income by downsizing to a smaller property could find that even a move right to the bottom of the property ladder would not release enough equity to provide a comfortable retirement. Ali Crossley, Director for Prudential's Home Equity Plans, said: "Selling-up to access just half the shortfall (£35,000) from the average UK house, could leave pensioners competing with first time buyers in the property market. A pensioner who wants to realise the full £70,000 shortfall could be unable to downsize far enough." Ali Crossley, added: "Lifetime mortgages, like the Home Equity Plan from Prudential, have the potential to provide an improved lifestyle for those struggling financially in retirement. Somebody age 67 with a house worth £152,000 could use a lifetime mortgage to provide the full £70,000 shortfall without the need to sell the house and the knock-on effects this could have. She concluded: "Everyone can take action to plan their retirement. Those interested in equity plans should seek independent financial and legal advice to see whether a lifetime mortgage is appropriate for them." Pru's research further shows that the public's confidence in lifetime mortgages has grown in the last year. The number of people aged over 55 who would consider taking out a lifetime mortgage post-regulation has more than doubled since 2003. This is also supported by latest figures from the Safe Homes Income Plans organisation. SHIP represents 90% of the equity release sector and its figures reveal that business has grown by record amounts to £1.3bn over nine months to the end of Q3, in comparison to the £881.4m for the same period last year. Financial News Feeds provided by OneCompare.com
Date published: 11/22/2004 10:05:13 AM
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