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Millions face retirement income shortfall despite holding substantial housing wealth – Fairer Finance

Its report showed that 65% of single female homeowners aged 55 to 70 will have retirement income below the Pensions UK moderate living standard, yet hold on average £225,000 in housing wealth. 

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Millions of UK homeowners aged 55 to 79 are facing a retirement income shortfall while sitting on substantial housing wealth, according to a report from Fairer Finance.

The Retirement Compass modelling showed that 65% of single female homeowners in this age group will have retirement income below the Pensions UK moderate living standard, yet hold on average £225,000 in housing wealth. 

In total, 3.7 million homeowner households aged 55 to 79 will have retirement income below the moderate standard, representing 46% of homeowner households in this age group.

The research found that single women are hardest hit, with over six in 10 (65%) of single female homeowner households aged 55 to 79 not meeting the moderate standard, compared to four in 10 (44%) single male households. 

Despite these groups holding similar levels of housing wealth, many are not drawing on their assets to close the gap.

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High awareness of equity release was reported among older homeowners, with 70% aware of the option, but only 13% having considered a lifetime mortgage. 

Most homeowners said they would reduce spending, downsize or continue working to supplement their pension income, while just 14% would consider using property wealth.

The report also found that 67% of consumers aged 18 to 54 agreed it is becoming more common to have a mortgage in later life, and 59% said it is becoming more acceptable, both up from 34% in 2021.

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Tim Hogg, director at Fairer Finance, said: “It’s important to help people save more into their pensions, but if we focus on pensions alone then we overlook a major asset that millions of households already hold. 

“Our research shows that huge numbers of people heading for a retirement income shortfall are sitting on significant housing wealth which could bridge the gap, if they want it to. 

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“The picture is particularly stark for single women, who face the highest risk of low living standards in retirement, despite often owning homes worth hundreds of thousands of pounds.”

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Hogg added: “Silos in regulated advice markets mean many people are not presented with all their options for borrowing in later life, and many don’t see downsizing as a viable option because there is a lack of desirable retirement housing. 

“Tackling these barriers will help millions of people improve their living standards in later life. 

“We need policymakers, regulators, and firms to work together to overcome the barriers that are preventing people from seeing their pension and their property as part of the same financial picture.”

REACTION:

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Jim Boyd, chief executive at Equity Release Council: 

“Following the Pensions Commission’s recent warning that 15 million people are under-saving for their retirement, Fairer Finance’s research explains how housing wealth can provide a lifeline for our rapidly ageing population and transform retirement living standards. 

“Despite property being the largest asset for homeowners, too often it is considered separately from pensions and savings and there is a lack of knowledge among consumers how property wealth can fund longer lives in retirement. 

“Property wealth is currently not part of the mainstream retirement conversation and there is a lack of actionable advice around housing wealth, and retirement options are biased toward pensions with a real risk that this important asset is overlooked. 

“As attitudes towards later life lending continue to evolve, it is vital that people can access clear information, appropriate advice, and products with strong safeguards, so they can make informed choices about what is right for their circumstances. 

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“The challenge to Government and regulators now is to create a system that helps consumers consider all their options in the round and use their assets more effectively to support financial wellbeing in later life. 

“Failure to grasp this issue now may consign millions of people to poorer living standards.”

Sadna Zaman, home finance proposition manager at Canada Life: 

“The report shows that for many approaching or in retirement, particularly single women, housing wealth is not being translated into financial security in later life. 

“Many hold substantial property assets, yet their pension provision falls short of even a moderate retirement income. 

“Despite this, most have never considered using their housing wealth to help sustain their income in retirement. 

“For advisers, this creates a clear opportunity to help clients understand how equity release and other forms of later life lending can turn property wealth into flexible, accessible funds, whilst still protecting long-term security and their wishes for passing wealth on. 

“Bringing property wealth into the conversation will be especially important for women and single-person households who, according to the research findings, face the greatest risk of a retirement income shortfall. 

“It is encouraging to see the regulator engaging with how the advice framework can better serve a generation of retirees facing very different circumstances to previous generations. 

“Regulatory reform, product innovation and enhanced adviser education will be vital to remove barriers in the advice landscape and support advisers to take a more holistic view of a client’s assets in retirement.”

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