Millions of older homeowners are facing retirement income shortfalls despite holding substantial levels of housing wealth, according to new research from Fairer Finance.
The independent consumer group’s latest report, Retirement Compass: the Later Life Finance Index, suggests that 3.7 million homeowner households aged between 55 and 79 are expected to have retirement incomes below the Pensions UK moderate living standard, despite many owning properties with significant equity.
The research, commissioned by the Equity Release Council, argues that housing wealth remains an underused resource in retirement planning and calls for government, regulators and the financial services industry to do more to help consumers consider property alongside pensions and savings when planning for later life.
Fairer Finance’s modelling indicates that 46% of homeowner households aged 55 to 79 will have retirement incomes below the moderate living standard, which is currently set at £31,700 a year after tax for single people and £43,900 for couples.
The findings come against a backdrop of wider concerns around retirement provision. The Second Pensions Commission’s Interim Report recently estimated that 15 million people are under-saving for retirement.
SINGLE WOMEN FACE THE BIGGEST CHALLENGE
The report highlights a particularly acute challenge for single female homeowners. Around 65% of single women aged 55 to 79 are projected to have retirement incomes below the moderate living standard, compared with 44% of single men.
Despite this, both groups are estimated to hold average housing wealth of around £225,000.
Among couples, 37% are expected to fall below the moderate living standard, while holding average housing wealth of £275,000.
Even among homeowners with significant property wealth, retirement income pressures remain evident. Fairer Finance found that 41% of single female homeowners with more than £400,000 of housing wealth are still expected to fall short of the moderate living standard. Among couples with similar levels of property wealth, the figure is 21%.
The research also points to a gender divide in retirement confidence. More than half of women aged 18 to 54 said they felt insecure about their family’s financial security in retirement, compared with 47% of men. Among homeowners aged 55 to 79, 32% of women reported feeling financially insecure in retirement compared with 20% of men.
HOUSING WEALTH REMAINS LARGELY UNTOUCHED
According to the report, 1.8 million homeowner households aged 55 to 79 have between £200,000 and £400,000 of housing wealth, while a further 650,000 hold more than £400,000.
However, relatively few appear willing to use that wealth to support retirement income.
When asked how they would respond to pension income shortfalls, 58% said they would reduce spending or adjust their lifestyle, 38% would consider downsizing and 28% would continue working or return to work.
Only 14% said they would explore using property wealth to supplement their retirement income.
While awareness of equity release products is relatively high, engagement remains low. Seven in 10 homeowners aged 55 to 79 said they were aware of equity release, yet only 13% had previously considered taking out a lifetime mortgage.
ATTITUDES TO LATER LIFE BORROWING EVOLVING
The research suggests attitudes towards borrowing in later life are becoming more positive, particularly among younger consumers.
Nearly six in 10 consumers aged 18 to 54 agreed that having a mortgage in later life is becoming more acceptable, up from 34% in 2021. Meanwhile, 67% said having a mortgage in later life is becoming more common, compared with 34% five years ago.
Tim Hogg, director of 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.
“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.
“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.”
Jim Boyd, chief executive of the Equity Release Council, said: “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.
“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.”
