Property to become more important in retirement planning

The importance of property equity in retirement planning is expected to grow in the future as a result of the recent pension reform, according to research of equity release lender more 2 life.

The survey among a representative sample of 100 retirement specialist advisers found that more than half (54 per cent) of advisers expect property to move to the centre of pension planning.

Another 42 per cent of advisers expect that demand for equity release products will climb over the next three years as a result of the new pension freedoms.

As people can now access their entire defined contribution (DC) pension savings (25 per cent of the amount is accessible tax-free), they will have more control over their entire pension wealth when planning for retirement.

More 2 life has estimated that some 2.05 million UK households aged between 55 and 64 own their homes outright.

With a significant proportion of pensioners’ wealth tied up in their property, 41 per cent of advisers believe pension freedoms will make the equity release sector more attractive as a revenue stream for adviser businesses.

Property wealth accounts for around 37 per cent of the total financial wealth in the UK, which is £9.515 trillion. This means the potential for retirement savers to unlock equity in their home is quite big, according to more 2 life.

Based on ONS figures the net property wealth across the UK population is around £3.528 trillion.

Dave Harris, chief executive of more 2 life, commented:

“As the market continues to grow and evolve, it’s important that financial advisers assess a client’s property wealth alongside their pension pots and investments when planning for retirement.

“As advisers and their clients begin to master the financial planning advantages on offer by tapping into tax-free equity in the home, we believe demand for innovative and flexible equity release products will grow.”