Millions of older homeowners across the UK are on course to experience a retirement income below recommended living standards, despite collectively holding substantial property wealth. New research from consumer group Fairer Finance indicates that a significant portion of the population aged between 55 and 79 faces a financial shortfall in their later years, highlighting a disconnect between housing assets and retirement planning.
The Retirement Compass report from Fairer Finance estimates that approximately 3.7 million homeowner households in this age bracket will have retirement incomes below the Pensions UK moderate living standard. This figure represents 46% of all homeowners within the 55-79 age group. The analysis suggests that while many of these households possess considerable housing equity, they are not actively considering it as a solution to supplement their retirement income.
The findings reveal a particular vulnerability among single female homeowners, with 65% projected to fall below the moderate living standard. This is despite these individuals holding an average housing wealth of £225,000. For single male homeowners, the equivalent figure stands at 44%, while 37% of homeowner couples are forecast to face a similar shortfall, even with average housing wealth of £275,000.
Fairer Finance's research also points to a broader challenge in retirement savings, echoing previous warnings from the Second Pensions Commission about 15 million people under-saving. Around 1.8 million of the identified households with an income shortfall hold between £200,000 and £400,000 in housing wealth, with an additional 650,000 owning property worth over £400,000. Despite this, only 14% of respondents said they would consider using their housing wealth to supplement their retirement income, with most preferring to cut spending or downsize.
The report highlights a significant gap in awareness and consideration of financial products that could utilise housing wealth. While 70% of homeowners aged 55 to 79 are aware of equity release products, only a small minority, 13%, have actually considered taking out a lifetime mortgage. This suggests that despite the potential for property to bridge an income gap, many are either unaware of the practicalities or hesitant to explore these options. Attitudes towards later-life borrowing are, however, evolving, with 67% of adults aged 18-54 believing it is becoming more common to have a mortgage later in life.
Tim Hogg, director of Fairer Finance, emphasised the need for a holistic approach to retirement planning, stating that focusing solely on pensions overlooks a major asset for millions of households. He called for policymakers, regulators, and firms to collaborate to overcome barriers preventing people from viewing their pension and property as part of the same financial picture, especially given the lack of desirable retirement housing options for those considering downsizing.
Source: Fairer Finance