The growing reliance on defined contribution pensions is likely to increase the role of housing wealth in retirement planning, according to Key Equity Release.
Key said its analysis showed that total residential property wealth held by over-60s is estimated at £2.92 trillion, around three times the £950 billion total market value of all defined contribution pension assets in the UK.
When buy-to-let property wealth is included, property wealth among over-60s rises to £3.84 trillion.
The equity release adviser said property wealth typically represents more than 40% of total household wealth for over-60s, but is not yet being used fully in retirement planning.
Around 59% of over-60s currently have some defined contribution pension assets, with the median amount held estimated at £102,000. Key compared this with average house prices of about £270,000.
However, around a quarter of over-60s have defined contribution pension funds of less than £25,000.
Key said defined contribution pensions now dominate UK retirement saving, with around 29 million people holding them, compared with 5.76 million people with defined benefit pensions, including 339,000 who are still paying into them.
The firm said the level of saving into defined contribution pensions was likely to support growth in the later life lending market.
It said lifetime mortgages, which can be used to refinance existing mortgage debt, fund home improvements, supplement retirement income or help family members, were increasingly moving from being viewed as a last resort to becoming part of mainstream retirement planning.
Key also pointed to product innovation in the sector, with many modern lifetime mortgages allowing customers to pay all, some or none of the interest, as well as make optional capital repayments. Products also include protections such as security of tenure and no negative equity guarantees.
Will Hale, chief executive of Key Equity Release, said: “The colossal switch towards DC in the UK pension landscape dramatically demonstrates why property wealth is increasingly important in retirement planning.
“Over-60s approaching retirement with modest DC pension pots need to look at all their assets and consider all options for funding their wants and needs in retirement. Property wealth has to be part of the mix.
“With property wealth typically representing more than 40% of household wealth and the value of residential property wealth held by the over-60s massively outstripping the market value of all DC pension assets it is important that advisers and clients consider all their options.
“Advisers should consider referrals to trusted specialists in situations where their own qualifications or scope of advice limit their options in order to ensure better outcomes for many more customers in later life.”
