Are property investments more reliable than pensions to fund retirement?

Are property investments more reliable than pensions to fund retirement?

Over-50s are set to cash in on the last 20 years of soaring house prices with many expecting to rely on income from their properties when they hit retirement.

Some pensions are beginning to decrease in real terms, and many people on the verge of retirement are now considering all the options available to them – with property investment coming out top as a way to fund the later years.

In a survey by OneFamily, almost a fifth (19%) of respondents over the age of 50 said that they intended to use property to support them after they retired, and with this age group owning a whopping £2.3trn of the country’s £4trn housing wealth, this could be a very wise choice.

It is expected that around 1.8 million homes will soon be sold by over-50s looking to release cash by downsizing, which according to the data will account for 28% of the total retirement income for those who take this route. Others will use buy-to-let investments as a form of ongoing income to fund their retirement.

Planning for the future is vital

Lifetime mortgages are another option that many will be looking at, with around £37bn expected to be released from property owned by those approaching retirement, accounting for a further 28% of the total retirement pot. This is a form of equity release on a property, where the homeowner secures borrowing on their property to take out money and no repayments need to be made until the end of the term. When the owner dies or moves into long-term care, the house is then sold to repay any outstanding borrowing to the lender.
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Of those who plan to use money from property when they retire, 26% said they believed real estate was more reliable than pensions, while 27% believed the value of their property was higher than the value of their pension, and 15% said pensions were unreliable.

Nici Audhlam-Gardiner, managing director at OneFamily lifetime mortgages, said: “It’s clear from the research that homeowners are seeing their property as a cash cow to fund their retirement, and with the dramatic house price rises we have seen, investing in property seems like a wise option.

“We’d urge homeowners approaching retirement to consider all the options open to them, and speak to a financial adviser, as how you fund retirement is one of the most important financial decisions you will ever make.”

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