The slump in the UK property market could have a huge effect on pensioners, as new research is released which reveals that more than a quarter of people in the UK aged between 55 and 64 are relying on property to fund their retirement.
As many pensions have been affected by the credit crunch and have lost value, people have increasingly turned to their bricks and mortar as income for their retirement.
But, now, new research has revealed a terrifying trend - pensioners who have been solely relying on a ‘property pension’ have seen a whopping £45 million wiped off their retirement savings in just one year.
According to the price comparison company uSwitch.com, 1.7 million pensioners are already relying on property to fund their old age – they were going to sell their home, buy a smaller property and use the extra cash to pay for their retirement. But now, with UK property prices dropping - the price of the average home has dropped in value by more than £27,000 over the last year - this may not be such a feasible option anymore.
Now, one of the only options for people who are looking to release some cash from their property is a plan such as an equity release scheme, under which a company will pay a person to live in their own home.
The equity release schemes differ but essentially most of them work by giving you a loan on the value of your property.
The deal is that you receive the loan as cash, usually on a monthly basis, but sometimes as a lump sum, and continue to live in your home.
The research also found that just over one in ten 55 to 64 year olds think they cannot afford to retire, with 18 per cent of over 65’s who are still working saying they cannot afford to retire either.
Ann Robinson, Director of Consumer Policy at uSwitch.com said, “Falling house prices coupled with the stock market crash and low savings rates have combined to take the wind out of the sails of many of those approaching retirement.”
“As the UK population ages and pension provision appears to stall, the UK is facing a very real retirement funding crisis,” she added.
The problem will hit the next generation of pensioners even harder, with one in four people aged 55 to 64 relying on a property pension.
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- 02/04/2009 13:50 - London property prices fall further
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- 31/03/2009 09:10 - London's empty homes to get a facelift
- 25/03/2009 11:25 - Landlords advised to go part-furnished for success
