House price crash drains Brit pension pots

Falling house prices have wiped off £29bn from British pension pots this year as nearly a tenth of the population relies on property to fund their retirement, new research reveals.

With three million working Britons relying on their property to supplement their pension, tumbling house prices have wiped £29bn off the value of their property pension pots this year alone, according to Baring Asset Management.

Barings' online survey of 1,574 non-retired adults conducted in July, found a quarter of individuals relying on their home for retirement are aged between 55 and 64 and a further 200,000 are over 65, leaving them little or no time to build up extra capital to help fund their retirement.

Relying on homes to fund retirement is particularly prevalent in the East Midlands with more than one in ten opting for this technique, while Londoners are least likely to take this approach.

Despite tumbling house prices during the financial crisis, almost three quarters of those depending on property to supplement or finance their retirement have made no changes to their pension in the past year.

The research also found only 4% of individuals have started to make alternative pension arrangements and are looking at other investment opportunities.

Marino Valensise, chief investment officer at Barings, believes it was convenient for people to view their home as a pension pot during the long house price boom, but recent events have exposed the risk of this tactic.

"Sadly, those approaching or at retirement age have little or no time to rebuild their savings and are paying the price," he says.

Valensise is alarmed so many people have not adapted their retirement plans despite plunging property value.

"Saving for retirement should start as early as possible and involve a well planned approach that controls risk through spreading investments across several asset classes.

"Apart from the tax efficient benefits of a pension plan, putting all your retirement eggs in the property basket is hopelessly optimistic."