This is leaving 7 per cent of the population dangerously exposed to fluctuations in the property market and overly reliant on the outcome of interest rate movements.
Ten per cent of 35-44 year olds are planning on retiring with the income they receive from property assets, compared with 8 per cent of 45-54 year olds and 6 per cent of 25-34 year olds.
A further 33 per cent of UK adults - 15.1 million people - are not currently making any provision for their retirement, with young people in particular failing to think about their financial future - as one in three (34 per cent) 25-34 year olds do not have any kind of pension plan in place.
Almost one in four (23 per cent) of those aged between 35-54 is not making any provision for their retirement and a staggering 22 per cent of over 55 year olds also do not have a pension in place for their imminent retirement. Barings’ research also reveals a huge gender divide in terms of pension provision, with 38 per cent of women not having a pension, compared with 27 per cent of men.
Barings’ CIO, Marino Valensise, advised: “Too many people are relying on property to fund their retirement. It’s crucial that we plan for our old age and that our investments are diversified amongst a number of different asset classes - not just property.
“The UK has seen an incredible increase in wealth in the last 20 years, fuelled, in part, by rising house prices in both nominal (gross of inflation) and real (net of inflation) terms; one factor has been the easier access to borrowing. It is highly unlikely that, during the next decades, we would experience similar levels of property price increases, especially in real terms.
“The events of the summer are already beginning to feed through to the average UK consumer in the form of higher borrowing costs based on more stringent lending criteria. This is likely to have an impact on the property market.
“Placing all your eggs in one basket in this manner really does leave you overly exposed to house price movements. Pensions should be invested in diversified assets that are in line with age, lifestyle commitments and number of years to retirement.”
The core part of an individual’s pension portfolio should include assets such as global equities and inflation linked bonds. The satellite part of the portfolio should include asset classes which would contribute ‘enhanced’ investment returns from themes which are less correlated to the ‘traditional’ asset classes.
Valensise concluded, “The longer you have before retirement, the more you should be placing in assets which will be able to generate a higher level of return. Our research shows that young people are putting off decisions surrounding their pension portfolios until they are older.
“Now that the onus is so clearly on the individual we have to start encouraging people to take a greater responsibility for their investments so that their pension fund will grow to a sufficient level by the time they come to rely on it.”
