Few homeowners plan to use equity despite pension deficit

Around 46% of homeowners in this age group, or 3.7 million people, are facing retirement on less than £31,700 a year, according to the Later Life Finance Index

Millions of homeowners aged 55-79 are projected to have a retirement income below the “moderate” living standard despite many having untapped housing wealth, new research has found.

Around 46% of homeowners in this age group, or 3.7 million people, are facing retirement on less than £31,700 a year, according to the Later Life Finance Index.

That is below the figure of £32,700 per year that Trade body Pensions UK has calculated that £32,700 is the deems necessary for a “moderate” 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 housing wealth worth more than £200,000.

The average amount of housing equity owned by 55-79 year-old homeowners, including those with higher and lower projected retirement living standards, is £350,000.

Single women are more likely to face a shortfall, the research revealed.

It found that 65% of single female homeowners aged 55 to 79 are expected to have retirement incomes below “moderate”, despite holding an average of £225,000 in housing wealth.

Among single male homeowners, 44% are projected to fall below the moderate living standard, while the percentage is 37% for couples.

The study also found that 1.8 million homeowner households aged 55 to 79 have between £200,000 and £400,000 of housing wealth, while a further 650,000 hold at least £400,000.

Despite this, relatively few older homeowners appear willing to use property wealth to fund retirement.

The study found that 59% of adults aged 18 to 54 believe it is becoming more acceptable to have a mortgage in later life, up from 34% in 2021.

Fairer Finance director Tim Hogg says: It’s important to help people save more into their pensions, but if we focus on pensions alone then we overlook a major asset that millions of households already hold.

Our research shows that huge numbers of people heading for a retirement income shortfall are sitting on significant housing wealth which could bridge the gap, if they want it to, he said.

The picture is particularly stark for single women, who face the highest risk of low living standards in retirement, despite often owning homes worth hundreds of thousands of pounds, he said.