Over a million people in the UK are relying on equity and future capital growth of their home to fund their retirement, according to a survey.
Some 12% of home owners aged 50 and over have put less into pension schemes because they expect property values to rise, the survey from specialist retirement insurer LV found.
The boom years of the UK’s housing market actually encouraged lower contributions to pension schemes in some cases, in the belief that soaring property prices would provide for them in old age.
As a result though of the property crash they are having to look again at their finances. The survey found that home owners nearing retirement believe an average of £27,250 has been wiped off their property value in the last two years. Some 17% are proposing to improve their homes to adjust their losses, 21% said they will save more for retirement and 29% said they will wait for property prices to recover.
‘In the decade leading up to the credit crunch, more and more homeowners saw their property as a potential cash cow to aid retirement. In a matter of months millions of pre-retirees have seen both their property and pension fund values battered,’ said LV spokeswoman Vanessa Owen.
The survey also found that confidence has not been dented and most homeowners hope the situation will improve. About a third said they believe that property prices will recover to former values in three to five years time. ‘Their confidence in the long-term value of bricks and mortar remains,’ added Owen.
She also said that trading down to a smaller house or using a suitable equity release product to get funds out of your existing home could play a big part in the plans of people approaching retirement.
The consumers’ association Which? though has warned that pensioners should only consider unlocking equity from their home as a last resort. Equity release schemes could be expensive, inflexible and leave people with little equity, it said. Money released from a property could also affect the level of means-tested benefits which owners were entitled to.