Pension planning needed beyond property ownership

by Gill Montia

Story link: Pension planning needed beyond property ownership

Standard Life is suggesting that Britons relying on equity released from their homes to provide a retirement income should check their calculations.

Research undertaken by the insurer suggests that it might not provide the kind of retirement income many expect, with even large sums secured from downsizing delivering only a very small weekly return.

For example, downsizing from a bungalow to a flat and taking a £25,000 profit would bring in just £22 per week, while someone who releases equity of £150,000 would receive a weekly income of only £130.

Andrew Tully, a senior pension technical manager at Standard Life, says: “Across the UK many people are pinning their hopes on a continuing strong housing market to provide the retirement of their dreams. The reality is somewhat different … our analysis shows retiring and banking on your main residence to provide a sufficient retirement income is a potential retirement disaster unless you have made sufficient provision elsewhere.”

The insurer is giving the same advice to the large numbers of people who have entered the buy-to-let market in recent years, taking advantage of low interest rates and rising property prices.

Many will be expecting their property portfolios to deliver income during their retirement, but with capital gain set to diminish in the immediate future and interest rates rising, they too should check their sums.