New research by LV= indicates that 1.3 million over-50s still plan to cash in their property to help fund retirement. However, homeowners nearing retirement believe an average of £27,250 has been wiped off their property value in the last two years.

The original 1960s hippies celebrated flower power, but as this generation approaches retirement, a new ‘HIPpy’ spirit has taken hold, according to a report published by LV=.

It claims the ‘Home Is Pension’ mantra is still strong among Britain’s over-50s workforce. Although those surveyed believed that an average of £27,250 has been wiped off the value of their homes, an estimated 1.3 million HIPpies still plan to use their property value to help provide retirement income.

In total, over-50s homeowners estimate they have lost £80 billion in property value due to recent housing market falls. Yet only 2% say have been turned off the idea of using their home to fund retirement, while a further 11% plan to take advice on unlocking the value of their home before they retire.

The new research also highlights the impact of the long-running house price boom on pension savings behaviour among over-50s homeowners now nearing retirement.

12% have consciously saved less into traditional pensions because of the perceived rapidly rising value of their home. A further 13% say they couldn’t afford to buy their own home AND invest in traditional pensions, because property prices were so high.

The LV= research reveals that the house price plunge has hit hardest among homeowners within five years of state retirement age (age 60 to 65) Six out of 10 people in this age group (58%) believe the value of their home has dropped by an average of £29,000.

However, many enterprising over-50 year olds have plans to recoup this lost equity. 17% will make home improvements to add to the value of their house, and one in five (21%) say they will save extra money wherever they can. 29% say they will simply bide their time for property prices to recover.

Many over-50s are experiencing a ‘double whammy’, having seen large amounts wiped off the value of their pensions and investments whilst also being forced to reduce the amount they are setting aside for retirement due to the pressures of living costs during the recession. One in five over-50s (20%) have had to cut their savings by an average of £137 a month, meaning that many more in future may need to cash in on the value of their homes to make up for pensions shortfalls.

Trading down to a smaller house is one obvious way to release money from property value. But over-50s homeowners who prefer to stay put can still realise some of the value they have built up, by using a suitable ‘equity release’ or ‘lifetime mortgage’ arrangement. However, this is a decision that should only be taken after careful consultation with family members and a professional financial adviser, as it will affect inheritance plans.

Vanessa Owen, LV= head of equity release, said: “In the decade leading up to the credit crunch