‘My house is my pension’ say half of over 50s
The number of people relying on the value of their house to fund their retirement has doubled in the past year, according to research from LV=.
Money Observer reports that of a survey of working people aged over 50, some 52 per cent say they plan to use their property as their pension, up from 28 per cent in 2012; this equates to 3.5 million people.
‘(This being so,) it is no wonder that with more than 10 million retirees owning their own homes, it is common to look at whether releasing cash from their home is a good way of supplementing income,’ says Steve Rees, managing director of debt consultants Vincent Bond & Co. Rees points to figures from the Office for National Statistics, which show that two-thirds of those aged 65 or over have more than £100,000 in wealth in their property, while only 40 per cent have such a sum in their pension. But pensions expert Steve Bee, founder of website Jargon Free Benefits, warns that ‘people are kidding themselves’ if they think their house is their pension. ‘It is dangerously delusional and it is just not going to work for the average person; they won’t be able to downsize enough,’ he adds.
Rees concurs, pointing out that the average cost of moving home is around £9,000, and the cost of moving increased 69 per cent between 2001 and 2011, while property prices rose by just 64 per cent in the same period. ‘If you are planning to downsize, you may have less to play with than you think,’ he explains.
Bee says the value of the state pension – which will be a flat rate of £144 per week from 2016 – is grossly underestimated by most individuals, pointing out that its value over a retirement is around the same as the average house price in Britain. He also emphasises the importance of occupational pension contributions. ‘The best way to arrange your pension is to get someone else to pay half of it, and that’s what workplace pensions are for. Imagine if the government was legally obliged to pay half of your mortgage – well, that is what it is doing with your pension, and people need to realise how much that is worth,’ he says.
(Article source: Money Observer)