A higher proportion of single female homeowners in this age bracket will find themselves with a retirement income of less than £31,700 per year, the amount set by industry body Pensions UK as the moderate living standard, compared to men – at 65% versus 44%. Both groups have average housing wealth of £225,000. For couples, this is 37%.
In total, the retirement income of 3.7 million homeowner households aged 55-79 falls below this standard, equating to 46% of all homeowners. Yet, some 1.8 million of those households have £200,000-400,000 of housing wealth, and a further 650,000 have at least £400,000 of equity.
According to research, by 2040 51% of households aged 60 and over could benefit from accessing their housing wealth in retirement through later life lending. It is estimated that these consumers will hold around £4.3 trillion in housing wealth. The same research estimates that it could unlock around £23 billion each year in today’s prices.
Retirement income shortfall
The findings follow a recent warning from the Pensions Commission that 15 million people are under-saving for their retirement.
Tim Hogg, director of consumer group Fairer Finance, which conducted the study, said that while saving into a pension was important, it should not be the only focus.
EPC planning: act now or risk the rush later
Sponsored by BM Solutions
He added: “Our research shows that huge numbers of people heading for a retirement income shortfall are sitting on significant housing wealth, which could bridge the gap, if they want it to.
“Silos in regulated advice markets mean many people are not presented with all their options for borrowing in later life, and many don’t see downsizing as a viable option because there is a lack of desirable retirement housing. Tackling these barriers will help millions of people improve their living standards in later life.”
Later life mortgages
Some 70% of homeowners aged 55-79 were aware of equity release, yet only 13% had previously ever considered taking a lifetime mortgage. Since 1991, more than 680,000 homeowners have accessed over £50bn of property wealth through equity release.
When it comes to supplementing their pension income in future, 58% of homeowners aged 55-79 said they’d reduce spending or adjust their lifestyle, 38% would downsize to a cheaper home and 28% would continue or return to work. In comparison, just 14% would explore utilising their property wealth.
Fairer Finance said this suggests the key barrier is not awareness; instead, many people never take the first step to explore how housing wealth could support their retirement options.
Attitudes to taking out borrowing later in life are shifting, however.
Five in 10 (59%) of consumers aged 18-54 agreed that it was becoming more acceptable to have a mortgage in later life, compared to 39% in 2023.
Calls for change
Jim Boyd, chief executive of the Equity Release Council, said: “Following the Pensions Commission’s recent warning, Fairer Finance’s research explains how housing wealth can provide a lifeline for our rapidly ageing population and transform retirement living standards.
“Despite property being the largest asset for homeowners, too often, it is considered separately from pensions and savings and there is a lack of knowledge among consumers how property wealth can fund longer lives in retirement. Property wealth is currently not part of the mainstream retirement conversation and there is a lack of actionable advice around housing wealth, and retirement options are biased toward pensions with a real risk that this important asset is overlooked.”
Fairer Finance is calling on government and regulators to:
• Substantially increase the supply of suitable, desirable retirement properties in the communities where older people wish to live.
• Lower the financial cost of downsizing by reducing stamp duty for people in later life.
• Normalise the use of housing wealth to maintain living standards in retirement.
• Develop a personalised service that brings pension and housing wealth into a single view.
• Reform Financial Conduct Authority (FCA) regulation around later life advice to break down silos and ensure consumers can maximise all their assets as they approach retirement.
Earlier this year, the FCA launched a market study into later life mortgages.
