Nearly two million retirees cashing in on homes
Nearly half of all HIPpies, or the home in pension generation, say they would consider downsizing to a smaller property, or using an equity release product (17%) to access the money in their property during retirement.
But many over-50s are faced with the reality that their house may not be as valuable as they had once hoped, with 39% of working homeowners over 50 believing their property has decreased in value over the last three years by an average of £21,749 – a massive £58 billion collectively.
In order to maximise the money they could use from their property, 18% of working over 50s who believe their property value has fallen aim to wait for their property value to improve before considering using the equity to help fund retirement, and a further 9% plan to make improvements to their home to try and increase its value. Despite the uncertainty in the housing market, more than half (54%) of working over 50s with children would recommend their child invests in property to fund their retirement.
With finances being stretched from all angles, it is no surprise that over a third (35%) of working over 50s admit they may need to delay their retirement for financial reasons, with an additional fifth (20%) looking at ways to boost their retirement income before they retire such as taking a second job or taking in a lodger. One in seven (14%) will be retiring when they planned; however will take a lower income in retirement than they originally thought they would. Worryingly one in six (16%) would rather not think about their retirement finances at all.
Vanessa Owen, LV= Head of Equity Release said: “Turbulent times are still ahead for the UK economy, but despite the uncertainty surrounding the housing market our HIPpies generation have not been discouraged.
“The number of over 50s planning to use their home as their pension has remained stable when we compare it to our 2011 report. A property is often the largest asset people have, so it makes sense for them to see it as a way of helping to provide an additional stream of income for them when they retire.”
Spending the cash
As well as using the cash in their property to supplement their retirement income, one in 10 (10%) of those over 50 who plan on using the money locked in their home will do so to help their children or grandchildren to buy a new home, save for a wedding or help with school fees. A further tenth (10%) also plan to use the money to pay for care in retirement. While many are accessing the money in their homes through necessity, 7% plan to use it to fulfil a lifelong ambition in retirement, such as travelling around the world, or buying a boat.
Low interest rates are a significant concern to those savings for retirement, as the interest received on savings has fallen significantly since the start of the recession. A third (33%) of working homeowners over 50 said they would be pleased if rates rose as the positive effect on their savings would outweigh any increase in the cost of paying back debt. Just over one in ten (13%) say an increase in the base rate would reduce their retirement income as the increased cost of paying debts such as loans and credit cards would restrict their ability to save.
Owen added: “With the purse strings being firmly tightened it is impossible to ignore the need for those over 50 to consider additional sources of retirement income.
“Planning ahead is vital, as is seeking professional financial advice. Using the money locked in their home can sometimes be the only way for people to secure a comfortable retirement.”