More than 6m over-45s rely on property to provide pension

With the outlook for savers looking grim, almost half of over 45 year-old homeowners - equivalent to just over 6m UK households - see property as a crucial part of their retirement income planning, research shows.

According to the latest Aviva Real Retirement Report, 69% of homeowners own a property worth more than their pensions, savings and investments.

With an average house price of £264,402 – 27% more than the UK average of £209,000 – even those over-45s who still have mortgage debt are likely to have significant equity built up in their property, which is good news given that the analysis reveals almost one in four (23%) mortgaged over-45s are concerned about paying off their home loans, including 8% who are very worried.

An average balance of £85,634 means these worried homeowners carry a collective burden of £87.2bn: equivalent to 7% of the UK’s outstanding £1.29tn mortgage debt.

Some 33% of mortgaged over-45s do not expect to pay off their loans before passing the old default retirement age of 65, while rather concerning, a further 17% do not know when they will become mortgage free. Another 4% think they will never pay off their mortgage: equivalent to 177,101 UK households.

But when asked about their plans for retirement, 80% want to remain living in their home for as long as they are physically able to, although many may have to downsize to free up funds to see them through retirement.

Clive Bolton, managing director, Retirement Solutions, Aviva UK Life, said: “Pension freedoms have resulted in new decisions for people to make about how they use their life savings, and these findings suggest we are also starting to see a shift in attitudes towards wider use of property to help fund retirement, as well as providing a place to live. Property assets more than match pension wealth for many older homeowners, so it is sensible to consider bricks and mortar among the options to supplement their savings.” 

Bolton points out that while the equity build up in people’s homes sounds like a lot, it is easy to overestimate how far that money will take them, especially given the fact that many older people wish to help their families as well as themselves. 

He continued: “People need to consider if there is enough house to go around and build this into their retirement plans alongside their other assets.
 
“As well as boosting day-to-day funds, people also earmark their property wealth to help pay for care, leave an inheritance and help younger generations onto the housing ladder. There are also widespread worries about paying off mortgages to address in later life, along with a general desire to avoid needing to move from the place they call home.”