Despite indications of a cooling housing market in most parts of Britain, people’s faith in bricks and mortar to fund their retirement has increased dramatically over the past 12 months. As many as 43 per cent of adults now expect property to be a top contributor to their income in retirement, compared to 31 per cent in 2006.
Belief in company pension schemes has subsequently slipped back from 40 per cent to just 36 per cent, meaning property now tops the list for our overall retirement expectations. There was, however, an increase or no change in the expected contribution from all the other sources of income in retirement.
We now lean on property in retirement more than company or personal pension schemes, with younger generations choosing to save nothing at all.
Returns on direct stockmarket investments are increasingly relied upon, with an increase from 12 per cent in 2006 to 15 per cent in 2007. In addition 18 per cent of people are hoping for an inheritance or a windfall to help them fund their retirement, while a further 18 per cent expect to rely on their current partner or spouse.
Hyman Wolanski, head of pensions at Alliance Trust, said: "It is no surprise to see that people’s confidence in company schemes funding their retirement has taken a downturn. Over the last year we have seen a continuation of the trend of company pension schemes closing initially to new employees and then to existing employees.
"There has been a tremendous growth in house prices over the last decade but, as we see initial signs of the residential property market cooling down, it is important that people don’t rely solely on their home to fund their retirement. For those who want to invest their pension fund in property there are plenty of collective vehicles available for this purpose, including some that invest in residential property.
"People often don’t appreciate that there are many financial products available to help them save for their retirement. Saving into an ISA, for example, could be a good way to kick start your retirement savings pot as it gives you much greater flexibility than pension schemes. This is particularly important for younger people and there are opportunities to transfer this money into a pension fund which you can control later on in life. It is important that people take active steps to plan for their future to give themselves a good chance of having a comfortable retirement.”
