Homeowners ‘Turn Backs’ On Pensions To Secure Financial Future

An increasing number of consumers are looking to release money from their property to secure their financial future, a new set of figures indicates.

In research carried out by the Motley Fool, half of homeowners surveyed are planning on downsizing to a smaller property upon retirement. Meanwhile, two out of seven are intending to make use of an equity release scheme. The news comes as findings from the company also revealed that only three out of five consumers are currently putting any money into pension accounts. However, as more than half of Britons questioned believe that their retirement funds will not be sufficient for them to stop working, the study indicated that many people could develop debt problems in later life. Those between 34 and 57 are reported to be the most concerned about how much money they have put away, with two-thirds of people in this age bracket said believe that they won’t have money to live a comfortable life after retiring.

David Kuo, head of personal finance for the Motley Fool, said: “Given the housing boom of the last few years it’s not surprising that some people have turned their backs on traditional pensions and focused instead on the value of their homes. However, it is vitally important to maintain a proper balance to ensure that we are not overly dependent on any one investment. It is tempting to think that we can ignore other investments just because the value of our home has gone up significantly.”

However, Mr Kuo suggested that those who choose to rely on their homes to secure their financial future in later life may find themselves facing monetary difficulties. “They often say that a man’s home is his castle and it seems that for seven million homeowners the home is also a pension fund. But building castles in the air is a dangerous strategy, especially if we haven’t put down solid foundations first,” he added.

The financial company also revealed that a quarter of people claim that increasing property prices are a “valid reason” to put less money into pension schemes. With 42 to 57-year-olds among the most likely to reduce the amount they put away, this age group was also indicated to believe the value of housing is set to rise by 11 per cent over the long-term. Figures from the company also reported those in their 40s are some of the most likely to consider an equity release scheme, with a third of respondents in this age bracket looking to free up the value in their homes when they eventually decide to retire. As a result, the financial services firm suggested that this is why more than half of consumers between the ages of 42 and 49 believe maintaining regular payments on secured loans is more important than making contributions into pension schemes.

Meanwhile, a study carried out by LV= last month revealed that those looking to get on the first rung of the property ladder are also undertaking financial risks. According to the findings, five per cent of adults under the age of 35 are prepared to take out a secured loan worth more than five times their salary. But with some 30 per cent said to be willing to avoid taking out insurance on their borrowing, the provider warned consumers may develop financial difficulties, as becoming ill unexpectedly or losing their job could see them struggle to make monthly mortgage payments.

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