Wooden front door with a key in the lock

Local independent financial adviser, Becky Hammonds of Willow Financial Solutions, takes a closer look at how pensions have overtaken property in the wealth charts but despite that, over two million homeowners aged over 55 still plan to downsize to fund their retirement.

It is estimated that more than two million people over the age of 55 are planning to raise extra cash for their retirement and for one-off purchases by downsizing to a smaller property.

Homeowners are hoping to raise more than £85,000 on average by selling their homes and buying a cheaper property with the proceeds, a survey by Prudential has found.

However, recent figures from the Office for National Statistics, show that more wealth is tied up in pensions now than in property, particularly among the best off people in the country, new official figures show.

Wealth per household was £302,500 in 2018-2020, at the median or midpoint level. That’s up from £286,600 in the previous two years, and by a fifth when adjusted for inflation over the past 14 years.

Pensions now make up 42 per cent of wealth in Britain, and property – minus mortgage debt – represents 36 per cent, according to the latest research by the Office for National Statistics.

But Prudential survey respondents still plan on using the equity from the sale of their property to fund their remaining years, with 41 per cent saying they would save or invest the cash they raise, while 29 per cent will put some into their pension pots – attracting tax relief in the process. 

However, I must offer a word of warning to those homeowners who have been lucky enough to gain from the long-term strength of the housing market: They should exercise caution if they are banking on downsizing to be the magic wand that provides a decent retirement income.

Bear in mind that over the last 10 years UK house prices have grown by 34.7% compared to UK stock market growth of 63.9% (figures from Hargreaves Lansdown).

People approaching retirement should seriously consider taking professional financial advice before ‘cashing in their chips.’

Remember that pensions are still the most tax-efficient savings vehicle. Selling your home may have tax implications.

For pensions and investment advice contact Becky Hammonds on 07969 269677 or email becky@willowfs.co.uk.