Millions of homeowners aged 55-79 are expected to have retirement incomes below the “average” standard of living despite many having untapped home equity, a new study has found.
Around 46% of homeowners in this age group, or 3.7 million people, face retirement on less than £31,700 a year, according to the Later Life Finance Index.
That is less than the £32,700 a year Trade body Pensions UK has calculated that £32,700 is the amount needed for a “reasonable” standard of living for a single retiree.
Produced by Fairer Finance for the Equity Release Council, the index found that 66% of all homeowners in this age group, or 2.45 million people, have a home equity worth more than £200,000.
The average value of the equivalent house owned by homeowners aged 55-79, including those with high and low expected retirement living standards, is £350,000.
Single women are more likely to face shortages, research shows.
It found that 65% of single female homeowners aged 55 to 79 are expected to have less than “average” retirement income, despite holding an average of £225,000 in housing wealth.
Among single male homeowners, 44% are expected to fall below the standard of living, while the percentage is 37% for couples.
Both single men and women hold an average housing wealth of £225,000, while couples hold an average of £275,000.
The survey also found that 1.8 million households aged 55 to 79 have a house wealth of between £200,000 and £400,000, with another 650,000 holding at least £400,000.
Despite this, few older homeowners seem willing to use real estate wealth to fund their retirement.
When asked how they would increase their pension, 58% of homeowners aged 55 to 79 said they would reduce their income or adjust their lifestyle, while 38% would reduce and 28% would continue or return to work.
Only 14% said they would explore acquiring material wealth.
While 70% of homeowners aged 55 to 79 said they knew about equity, only 13% had considered taking out a lifetime mortgage.
Attitudes towards borrowing in later life appear to be changing, particularly among younger consumers.
The survey found that 59% of adults aged 18 to 54 believe it is becoming more acceptable to have a mortgage as they get older, up from 34% in 2021.
Fairer Finance director Tim Hogg says: “It’s important to help people save for their pensions, but if we focus on pensions alone we’re ignoring the huge asset that millions of households already have.
“Our research shows that a lot of people who are looking for a shortfall in retirement money are sitting on a huge wealth of houses that could fill the gap, if they wanted to.
“The picture is particularly stark for single women, who face a greater risk of living low in retirement, despite often owning homes worth hundreds of thousands of pounds.
“We need policymakers, regulators and firms to work together to overcome the barriers that prevent people from seeing their pensions and assets as part of the same financial picture.”
The chief executive of the Equity Release Council, Jim Boyd, says: “Following the Pensions Commission’s recent warning that 15 million people are saving too little for retirement, Fairer Finance’s research explains how housing wealth can help our rapidly aging population and transform retirement living standards.
“As attitudes towards late lending continue to evolve, it is important that people get clear information, the right advice and products with strong protections, so they can make informed decisions about what is best for their circumstances.
“The challenge for Government and regulators now is to create a system that helps consumers consider all their options and use their assets effectively to support financial well-being in the future.”
