Many working over-50s believe their home will play a significant part in funding their retirement

Over a quarter (28 per cent) of working homeowners over the age of 50 (1.9 million people [1]) plan to access the equity in their home to help fund their retirement, according to retirement specialist LV=, dubbing them the ‘HIPpies’ (Home Is Pension) generation.

 

Low confidence in the housing market

The LV= 2012 HIPpies report reveals that despite low confidence in the housing market, many working over-50s still believe their home will play a significant part in funding their retirement. While over a quarter are planning to use the equity in their home, nearly half (49 per cent) of homeowners aged over 50 say they would consider downsizing to a smaller property, or using an equity release product (17 per cent) to access the money in their property during retirement.

Many over-50s are faced with the reality that their house may not be as valuable as they had once hoped, with 39 per cent of homeowners over 50 believing that their property has decreased in value over the last three years by an average of £21,749 – a massive £58 billion [2] collectively.

Investing in property to fund retirement

In order to maximise the money they could use from their property, 18 per cent of over-50s who believe their property value has fallen aim to wait for their property value to improve before considering using the equity to help fund retirement, and a further 9 per cent plan to make improvements to their home to try and increase its value. Despite the uncertainty in the housing market, more than half (54 per cent) of over-50s with children would recommend that their child invests in property to fund their retirement.

Delaying retirement for financial reasons

With finances being stretched from all angles, it is no surprise that over a third (35 per cent) of over-50s admit they may need to delay their retirement for financial reasons, with an additional fifth (20 per cent) looking at ways to boost their retirement income before they retire, such as taking a second job or taking in a lodger. One in seven (14 per cent) will be retiring when they planned but will take a lower income in retirement than they originally thought they would. Worryingly, one in six (16 per cent) are not thinking about their retirement finances at all.

Providing an additional stream of income

Turbulent times may still be ahead for the UK economy, but despite the uncertainty surrounding the housing market the HIPpies generation have not been discouraged. The number of over-50s planning to use their home as their pension has remained stable when compared to the LV= 2011 HIPpies report. A property is often the largest asset people have, so, if appropriate, it makes sense for them to see it as a way of helping to provide an additional stream of income for them when they retire.

Cashing in to supplement retirement income

As well as using the cash in their property to supplement their retirement income, one in ten (10 per cent) of those aged over 50 plan on using the money locked in their home to help their children or grandchildren to buy a new home, save for a wedding or help with school fees. A further tenth (10 per cent) also plan to use the money to pay for care in retirement. While many are accessing the money in their homes through necessity, 5 per cent plan to use it to fulfil a lifelong ambition in retirement, such as travelling around the world or buying a boat.

Significant concern to those saving for retirement

Low interest rates are a significant concern to those saving for retirement, as the interest received on savings has fallen significantly since the start of the recession. A third (33 per cent) of homeowners aged over 50 said they would be pleased if rates rose, as the positive effect on their savings would outweigh any increase in the cost of paying back debt. Just over one in ten (13 per cent) say an increase in the base rate would reduce their retirement income, as the increased cost of paying debts such as loans and credit cards would restrict their ability to save.

All 2012 figures taken from research carried out for LV= by Opinium Research from 28 August to 3 September 2012 amongst 1,051 UK adults aged over 50 and in employment.

According to the 2012 ONS Labour Force Survey, there are 8,437,258 over-50s currently in full or part-time employment. 81% of these own their own home, giving a base of 6,834,179.

[1] 28% of over-50s are still working and own their own home – 28% of 6,834,179 gives a nationally representative figure of 1.9 million.

[2] 39% of over-50s who are homeowners and who have not retired said their property has decreased in value – the average value wiped off properties is £21,749. 39% of 6,834,179 is 2.66 million. This is then multiplied by £21,749 to give a total of £57.9 billion rounded to £58 billion.