A report from the Society of Pension Professionals (SPP) said that although UK retirees currently held around £3.84trn in housing wealth, they collectively faced an annual retirement income deficit exceeding £48bn, and warned that failing to join up housing and pension policy risked millions of people falling into a financial shortfall later in life.
Merge housing advice with retirement planning
The ‘Home Truths‘ paper suggested this could be resolved by merging property wealth into mainstream later-life advice platforms such as MoneyHelper and Pension Wise, to break down the regulatory silos between mortgage, equity release and financial advice as the separate qualifications made “holistic advice less likely”.
The SPP noted that these platforms separated housing wealth from wider later-life guidance by placing them under ‘home’ categories rather than retirement planning.
It said: “Advisers could be required to consider the potential role of housing wealth in funding retirement, while preserving equity release as an advised sale.”
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The organisation also suggested reviewing the mortgage, equity release and financial advice regulatory boundaries, saying this made some guidance difficult, such as a mortgage adviser recommending lifelong borrowing where a client has investment assets.
Older homeowners need more mortgage variety
Regarding the products available to older homeowners, the SPP said there needed to be more diversity and better risk management.
It said the equity release market was “dominated” by insurers matching lifetime mortgage assets against annuity liabilities, thereby restricting variations in products.
“Broader funding models could support products such as automated income lifetime mortgages, lifetime mortgage-funded annuities, short-term equity release, and home equity lines of credit,” the report added.
It said the Financial Conduct Authority (FCA) could encourage competition and reduce product bias through Consumer Duty rules, while insurance solutions linked to housing wealth could help retirees manage tail risks better. The report said reforming the barriers around demand and distribution would also support appetite for new products.
Make downsizing rewarding
The report said although housing wealth could be accessed through downsizing, less value was released once stamp duty and associated moving costs were deducted. Further, a shortage of suitable homes made the option less attractive.
Tax and policy settings also “distort” decisions between housing and pension wealth, the report said. While stamp duty impacted the financial benefit of downsizing, the tax advantage of passing a home on to relatives encouraged people to stay put.
The report said: “This habit of passing on the family home is increasingly out of step with how housing, mobility, and wealth work in the UK today. In principle, a retiree might use equity release alongside pension drawdown to reduce taxable pension withdrawals, but advice silos make co-ordinated recommendations difficult.”
The current approach steers people towards preserving housing wealth, while making access to it “costly and fragmented”, it argued.
The SPP said it was worth exploring a one-off stamp duty relief for older homeowners downsizing, similar to the one available to first-time buyers.
“More neutral taxation of retirement and housing wealth would help level the playing field between downsizing, equity release and retaining housing wealth. Reform would need careful calibration to protect lower-wealth households, but the current system could do more to improve retirement outcomes.”
This would need to be accompanied by an increase in the supply of suitable homes for older people.
Acknowledging retired renters
The paper said many retirement models still assumed that most people would retire mortgage-free, but declining homeownership rates and a rise in lifelong renters meant people would need around £269,000 more in pension savings to cover rental costs.
It added that current housing costs were significantly higher than they had been for previous generations and for many, “housing will never play that complementary role at all”.
The SPP suggested updating retirement benchmarks to account for people who rent or have a mortgage later in life.
Housing wealth is not a substitute for pensions
Amanda Cooke, chair of the SPP Financial Services Regulation Committee, said: “Pensions and housing draw on the exact same household resources, yet policy treats them as completely separate worlds.
“While current retirees often rely on property equity to mask savings shortfalls, future generations facing high rents and lower homeownership rates simply won’t have that cushion. We need an integrated approach, one that unifies guidance, updates living standards to reflect real housing costs, and unlocks institutional pension capital to help build the homes the UK desperately needs.”
Jim Boyd, chief executive of the Equity Release Council, said the SPP was right to highlight that housing and pensions should not be treated as separate policy challenges.
“Housing wealth is not a substitute for adequate pension saving, but it is a significant asset for millions of homeowners and needs to be considered in unison with pensions, savings and investments when planning for retirement. Fairer Finance modelling found that by 2040, 51% of UK households aged over 60 could benefit from accessing their housing wealth to support their later life spending needs.
“The challenge is ensuring people can consider all of their assets when making retirement decisions, rather than being channelled into separate advice silos. The FCA’s recognition of later-life lending as the ‘fourth pillar’ reinforces the need for a more joined-up approach. Good outcomes must come before products, with consumers given access to clear guidance and advice to understand how their assets can work together throughout later life, something upheld in the council standards.”
Boyd said the council welcomed the calls for greater integration and would be open to working with government, regulators and industry to turn that into practical change.
