12% of pensioners to downsize home to boost income; unlocking £136bn

26th September 2014

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Increasing longevity means pensions are no longer lasting as long as retirement but more than one in 10 pensioners plans to sell their home to cover their retirement costs.

Research by insurer MGM Advantage shows 12% of the UK’s retired population plan to downsize their property within the next five years, unlocking up to £136.5 billion of housing equity in the process.

This means as many as 1.36 million people are planning to move into a smaller home to help fund their retirement, on top of the 1.99 million people who have already downsized.

MGM said the amount of cash that could be unlocked from the average home is significant. Moving from a detached property to a bungalow, taking into account stamp duty and moving costs, pensioners could get their hands on an average of £102,851. Thanks to house price rises, this cash amount has increased 18% from a year ago when the average amount unlocked was £84,776.

Unsurprisingly, those in London are able to release the most cash, with an average amount of £295,593. This is followed by the South Easter with £173,468 and Eastern England at £92,857. Pensioners in Wales are able to release the least, on average £54,301 after moving costs.

Andrew Tully, pensions technical director at MGM Advantage, said: ‘People often refer to their property as their pension, and these numbers show that any are considering downsizing to provide an income boost in retirement. However, the downsizing dream could turn into a retirement nightmare, as some areas of the country fare much better than others. This is simply a reflection of the housing market in the UK.’

He warned that relying on property to fund retirement is a risky plan.

‘Banking on your own home to provide an income in retirement does not come without risk,’ he said. ‘The old adage of all your eggs in one basket still holds true. Careful planning and consideration should be given before making the move, and with returns available from the cash released still very low, it is likely the capital will also be consumed over time. If people want to stay in their homes to avoid the upheaval of moving, then solutions like equity release can provide an alternative route.’

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