Most pensioners are not drawing on wealth tied up in the value of their homes to help fund retirement, according to research by the Institute for Fiscal Studies.
House values account for the largest part of pensioner wealth outside of a pension pot, with 80% of over-50s owning their own home, worth an average of £153,152.
The majority of homeowners are not accessing this wealth, instead keeping their home throughout retirement and eventually passing the value on to younger generations as part of their estate.
Downsizing is one way homeowners could release housing wealth, with many tempted by the incentive of being mortgage-free if they were to move into cheaper and smaller accommodation.
However, around 60% of homeowners over 50 are not expected to move house.
Those who do choose to move don’t tend to be motivated by financial reasons, instead making the decision to be closer to friends or family, for health reasons or to move to a better area.
The report also found wealth was being kept in second homes rather than being sold to finance retirement, as ownership of second homes increased among those in their late 50s to late 60s.
In February 2020, the average UK retired homeowner’s property wealth increased by £3,152 since February 2019, despite the impact of political and economic uncertainty according to Key’s Pensioner Property Equity Index.
Since the beginning of 2020, retired homeowners have experienced a property wealth growth of 45%, which amounts to never £354 billion, and an average increase of £75,000 over the last decade.
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Will Hale, CEO at Key, said:
“Political and economic uncertainty hit the housing market last year, but there were genuine signs of recovery towards the end of last year and retired homeowners who no longer have mortgages were big beneficiaries.
Interestingly, it was the over-65s in Wales who made the biggest gains – seeing the value of their property increase by nearly £1,000 a month – while those in East Anglia and the South East saw modest falls.
While it is useful to be aware of market fluctuations, what happens on a monthly basis is unlikely to alter the simple fact that millions of over-65s retain considerable property wealth which can transform their standard of living in retirement and enable them to address a wide range of financial issues.”
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