30% of people will use property wealth to boost retirement income in 2020

Nearly one in three people retiring this year plan to use their property wealth to help bolster their retirement income, highlighting the growing importance of property in retirement planning, according to new research from Key.

The over-55s specialist adviser examined the finances and ambitions of over 1,000 people expecting to finish full-time work in 2020. It found that they own property worth more than £142.5 billion, with an average of £388,900 each.

Key’s ‘Retirement Class of 2020’ study shows 30% of people retiring this year will use their property wealth in retirement. Nearly half (46%) will look to downside to a smaller property while 23% will consider equity release or remortgaging.

But the nationwide research found just two out of five (40%) property owners say they are happy with their expected retirement income and do not need to consider their property wealth.

Focus on inheritance and borrowing woes

The desire to leave an inheritance to family is the biggest reason for not using property wealth in retirement, with 16% of homeowners wishing to leave the house to their family. However, 15% are worried about borrowing money and a further 15% do not want to move.

Other reasons for not using property wealth in retirement include concern about the reputation of equity release (8%) and fear of making a mistake (6%).

With over-65s having more than £1 trillion pounds worth of unmortgaged housing equity, Key has launched a new marketing campaign to encourage people to get answers to questions they may have around equity release.

The campaign – which is running across TV, press, digital and social – aims to inform and educate older homeowners to ensure that unanswered questions are not discouraging them from considering all options.

Sentiment around the country

The study revealed that people expecting to retire in London are the most likely to use their property wealth in retirement and have the most wealth on average at £661,900 each, followed by homeowners in the South East.

Meanwhile, people in East Anglia are the least likely to use property wealth to boost retirement income – around 17% will consider it even though they have average property wealth of £426,400.

“With people retiring this year owning homes worth an average of £388,900 and total property wealth of £142 billion, there clearly is a lot of wealth that could be used in retirement,” Will Hale, chief executive officer at Key, comments.

“Many will not need to use their home as part of retirement planning, but it is worrying if people are not taking property wealth into consideration due to a lack of awareness of the options available to them or as a result of myths or misconceptions about products.”

He continues: “Our research shows many are worried about borrowing money or moving to a new house while others are concerned about making mistakes. These customers could benefit from information and advice when assessing their options for using property wealth and, while equity release is not right for everybody, modern lifetime mortgages with low rates and flexible features such as the ability to service interest or repay capital mean that they offer potential solutions for a wider range of customers than ever before.”