According to In Retirement Services, people are planning to use the equity in their home to finance their life after they retire. The firm has warned that in order to secure a minimum pension of £20,000 from a family home at the age of 65, the property would have to be worth in excess of £1 million at current prices.
This raises the problem that there is only an estimated 89,000 properties in that value band, but around three million people are planning on borrowing against property to fund their retirement.
In Retirement Services did not dismiss the idea entirely as it believed that considering equity in a property as a supplement to a pension was appropriate, but the primary concern was that too many people were unrealistically viewing their main property as their retirement fund.
Daren Carter, managing director of In Retirement Services, said: “Equity release has changed the quality of life for thousands of pensioners and we foresee it growing rapidly, especially as spiralling property prices over the last decade have left homeowners with over £1.2 trillion of wealth tied up in their properties.
“Unfortunately, this fundamental misunderstanding could result in many people not funding a proper pension plan and failing to secure a proper standard of living at retirement.”
Paul Fielding, IFA at Cambria Financial, commented: “I’ve never had anyone relying on equity release for pension purposes. There may be a tendency in the future, but people will mainly use the finance to supplement it.”
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