PPI report says housing wealth could play greater role in retirement

Housing wealth could play a greater role in supporting retirement in the future, the Pensions Policy Institute says.

But the educational charity's report - commissioned by Prudential UK and Europe - warns not everyone has housing wealth and those who do don't always see it as a way to save for retirement.

It argues that, for most people, housing wealth would be a complement to saving in a private or occupational pension, not a substitute.

PPI director Niki Cleal says: "The main way that home ownership supports retirement for many people is to reduce living costs in retirement.

"Owning your own home in retirement can reduce living costs relative to paying rent (not having any housing wealth) by around 30% for a single person and by around 40% for a married couple."

She adds: "This research shows that if current demographic and homeownership trends continue, the number of households where the head is aged over state pension age with higher value housing wealth which could be used to release equity to support retirement - whether by downsizing or using commercial equity release products - could increase by a third, to 5.2 million households by 2030.

"There may still be a number of barriers to the use of housing wealth to support retirement: many people are emotionally attached to the family home or may wish to leave the home as a bequest. Pensioners may also be concerned about the costs and risks of releasing housing equity."

The PPI report is the second in a series of reports looking at the evolution of financial needs during the course of retirement and the roles of different sources of income in meeting those needs.

The first report in the series - 'Retirement income and assets: do pensioners have sufficient income to meet their needs? - considered the needs and aspirations of pensioners.

Prudential director of lifetime mortgages Keith Haggart added: "The first PPI report in this series highlights the fact that, during retirement, income needs change. At retirement people spend more money on leisure and require a higher level of income. This need for income falls as travel costs reduce and then rise again in later retirement as health costs increase."

"However, for most people their income is fixed or rises only in line with inflation. This [latest] report shows that the real benefit of equity release is it allows customers to supplement their retirement income to match their individual needs."