More than 3.9 million over-55s plan to downsize to a cheaper property later in life – but are driven by the thought of an easier retirement rather than conserving cash.
According to new research from Prudential, 47 per cent of over-55 homeowners plann to sell and move to cheaper homes in later life. On average they expect to raise around £112,000 in equity by downsizing, with around one in 10 (11 per cent) expecting to make more than £200,000. In fact, more than one in seven (13 per cent) said they could not afford to retire unless they downsized.
However, it is not all about the money – the main reason for downsizing is the convenience of running a smaller home in retirement. Nearly three-quarters (74 per cent) rated convenience as their main reason for downsizing, compared with just 28 per cent who said they were doing so to mainly release cash for retirement. Meanwhile, just over one in three (34 per cent) said having a smaller garden was a major motivation.
Vince Smith-Hughes, a retirement income expert at Prudential, said: “It is interesting to see that these figures challenge the common theory that ‘my house is my pension’. Although we see a large proportion of those taking equity from their homes to boost their retirement incomes, most people have accepted that the main reason they need to move home in later life is for convenience.
“With the average amount of equity raised likely to be just over £100,000, and with many other demands on this cash – such as helping children, paying off debts and putting money aside to pay for care in the future – it is clear that for most people the best way to fund retirement is through saving as much into a pension as early as possible in their working lives.
But worries about a shortage of homes suitable for retirement, fees and high property prices are the major reasons deterring some older homeowners from downsizing, the study found.
“The results also show that many people are worried about that the costs involved in moving house may eat into the equity they’ll be able to take from their home. Most people who are considering making major financial decisions, such as selling their home, in the run up to retirement should benefit from a consultation with a professional financial advisor and the free guidance on their pension options available from the Government’s Pension Wise service,” said Smith-Hughes.