Lifetime mortgages: Don't bank on equity release

Monday, 03 March 2008 12:00

Homeowners pinning their hopes on investment in their property to fund their retirement may face disappointment, new analysis shows.

While many people plan to retire on the equity released from their home and by downsizing to smaller, cheaper property, Standard Life has today unveiled a study which shows this will only provide 16 per cent of the average person's retirement income.

The building society is urging people to set up savings and retirement investment options elsewhere in a bid to prepare properly for post-working life.

Although a variety of factors is taken into consideration in these calculations, Standard Life found the type of home - detached, semi-detached or flat - and the region of the country it is located affect greatly how much people will eventually gain.

People living in detached house could generate about 35 per cent of their retirement income by moving to a semi-detached property. But those moving from a semi to a flat might only generate two per cent.

Those living in London or the south-east, where property prices have soared most steeply over the last few years, have the greatest potential to supplement their retirement income. But those in East Anglia or Scotland could face the least income.

Andrew Tully, senior pension technical manager at Standard Life, said: "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."

He added: "Although there may be many ways to unlock the value in your home, for example equity release, drawdown equity as well as downsizing, a broader mix of assets and investments combined with tax efficient wrappers should be considered, but always consult a professional financial adviser."

• Tags:
• lifetime mortgages
,
• news