Over-45s are three times more likely to be renting their home than 20 years ago, and some may never own a home.
With smaller pensions than the previous generation, over 45s are planning to turn to the family home to pay for their later years by selling up in favour of a smaller cheaper property
According to latest ONS data, almost four out of five Brits on the cusp of retirement plan to downsize to unlock cash from the family home to fund their later lifestyle, according to new research.
Among those aged between 45 and 60 years old – known as Generation X – a striking 78% plan to take advantage of high house prices and use the equity from their familial home to supplement their pension by selling their property and downsizing.
This is much higher than the average of 59% among all age groups, according to the research from annuity comparison website Annuity Ready.
Overall, more than a quarter (28%) of Brits plan to use the value built up in their home to help fund their retirement – whether by downsizing or using equity release.
The data paints a picture of a nation increasingly dependent on property wealth to fund retirement, rather than solely on the state pension and private pensions.
But with around 75% of the population owning a property as they reach retirement, many people are sitting on – and sleeping in – a significant store of wealth.
But there are a number of benefits to downsizing. Estate agents Savills pointed out some possible pros to moving to a smaller property.
1. Financial freedom
On average people in the UK hold more housing wealth than pension wealth, the ONS has found. Yet based on levels of pensions and savings alone, almost four in ten (38%) future retirees are heading for an income below the recommended minimum living standard, according research by Scottish Widows.
This highlights a major mismatch between resources and retirement funding strategies. Downsizing will likely unlock a significant amount of equity to invest or to enjoy as retirement savings. Monthly expenses could also be reduced by downsizing.
2. Less maintenance and clutter
Big family homes are demanding – from cleaning and maintenance to gardening. Downsizing can reduce the physical demands of running a bigger property and selling off your preloved items could raise extra money towards buying better suited furniture or a post-move holiday.
3. Future proofing
A smaller home often means fewer stairs and a smaller square footage means the layout will be more accessible – which may be an advantage in later life if mobility issues creep in.