Its analysis of the latest data from the Land Registry and Office for National Statistics (ONS) shows that house prices have grown by 91% or £109,399 in real terms since 1997, from £120,211 to £229,610.
In contrast, the average retirees' income has risen by just 46%, equivalent to an extra £6,343 in their annual budgets. This has taken their average gross income from £13,786 to £20,129.
With the government capping individual contributions towards the cost of long term care at £72,000, it would take 11.4 years of putting this extra income to one side before reaching the amount retirees need to spend before they can access state support, the firm says.
Those retiring in years to come also face the prospect that their property assets are decreasing. House prices have grown just 21% or £40,422 in real terms in the last 10 years and fallen 8% or £19,017 in the last five years.
So the instability of the property market in recent times has at least allowed retirees' incomes to regain some ground on house prices in terms of their rate of increase. However this has not been enough to rival the overall growth rate of property values over the last 15 years.
Before the financial crisis of 2007/2008, the contrast was even greater. Typical house prices rose by 31% in the previous five years compared with 18% growth pensioner income and by 107% in the previous 10 years compared with growth of 40% in pensioner income.
Overall retirement income is increasingly reliant on pensions as investment returns have dropped, the firm points out. Falling income from investments has meant that pensions have become increasingly important as a source of income for UK retirees. While investment returns typically made up 16% of their income 15 years ago, this has fallen away to just 6% in 2012.
At the same time, retirees have been more reliant on private pensions and annuities, which now account for 40% of their income, compared with 37% five years ago and just 32% fifteen years ago. Since the financial crisis, state pensions have also grown in importance and now make up 38% of retirees' income compared to 36% five years ago.
‘What we are seeing is a new reality emerging in terms of retirement income as people increasingly look to pensions and annuities, rather than investments, to finance their later years. However, the uncertainty surrounding many funds means that people's property is very often their biggest and most secure financial asset, with a far greater return on their original investment,’ said Nigel Waterson, chairman of the Equity Release Council.
‘Particularly if they bought their homes some time ago, many will have a large amount of equity tied up in their property that can relieve the pressure on their retirement income and help with additional expenses. In many cases, equity release can offer retirees an alternative to selling their property and one that preserves their domestic comfort as well as their attachment to the place they call home,’ he explained.
‘Whether choosing a lump sum or regular monthly payments, equity release customers can enjoy the relief of an extra source of retirement income, safe in the knowledge they are free to remain in their homes for the rest of their lives, if they choose to, and will never owe more than the property is worth,’ he added.
