Younger people more likely to see property as a source of retirement income
Younger people in the UK are three times more likely than the older generation to use their property wealth to fund retirement, it is claimed.
Some 9% of 16 to 54 year olds expect the wealth stored in their homes to be their main source of income in retirement, triple the 3% of those aged 55 and over, according to figures from Canada Life Home Finance.
It suggests that the younger generation recognise the role that property wealth will play in financially supporting their later lives and they are generally more comfortable viewing their wealth holistically.
‘It is good that the younger generation recognises that they can unlock wealth from their property in retirement. This openness is likely driven by the reality that many under 50s will receive less generous pensions under the defined contribution scheme, compared to the majority of the older generation on the defined benefit plan,’ said Alice Watson, head of marketing and communications at Canada Life Home Finance.
She pointed out that the research also illustrates the evolving profile of retirement income, and lends further weight to the argument that equity release is moving into mainstream financial planning.
The research found that half of under 55s expect that either their state or workplace pension will provide them with sufficient money in retirement while 21% believe that their savings will cover their income needs.
But other data suggests that these sources of income may not materialise as expected. In April, HMRC revealed record tax receipts that indicate many people are accessing their pensions in earnest following the pension freedoms reform in 2015.
And the firms says that the 21% who think they will have enough savings may be more in hope than expectation, with research finding that a significant number of people underestimate their life expectancy. Consequently, some people may not have sufficient funds for their retirement.
‘Following the pension freedoms, there is a growing fear that people’s retirement income might not be able to provide them with the sort of lifestyle they’re hoping for. However, there is a range of equity release products that can help customers enjoy their later life, from helping clear existing debts to funding lifestyle enhancements,’ said Watson.