Millions of homeowners aged 55 to 79 are expected to have retirement incomes below ‘moderate’ living standards, despite many having untapped housing wealth, new research shows.
Around 46% of homeowners in this age group, or 3.7 million people, retire on less than £31,700 a year, according to the Later Life Finance Index.
That is less than the figure of £32,700 per year that Trade Body Pensions UK has calculated that £32,700 is considered necessary for a “moderate” standard of living for a single pensioner.
The index, compiled by Fairer Finance for the Equity Release Council, shows that 66% of all homeowners in this age group, or 2.45 million people, have home equity worth more than £200,000.
The average amount of home equity owned by 55-79 year old homeowners, including those with higher and lower expected living standards, is £350,000.
Single women are more likely to have a deficiency, the research shows.
It found that 65% of single female homeowners aged 55 to 79 are expected to have a pension income below ‘moderate’, despite owning an average of £225,000 in home equity.
Among single male homeowners, 44% are expected to fall below the moderate standard of living, while among couples this percentage is 37%.
Both single men and women have an average home wealth of £225,000, while couples own an average of £275,000.
The research also found that 1.8 million homeowners aged 55 to 79 have between £200,000 and £400,000 in home equity, while a further 650,000 households own at least £400,000.
Despite this, relatively few older homeowners appear willing to use their real estate assets to finance their retirement.
When asked how they would supplement retirement income, 58% of homeowners aged 55 to 79 said they would reduce expenses or adjust their lifestyle, while 38% would downsize and 28% would continue working or return to work.
Only 14% said they would explore access to real estate assets.
While 70% of homeowners aged 55 to 79 said they were aware of equity release, only 13% had previously considered taking out a lifetime mortgage.
Attitudes towards borrowing later in life appear to be changing, especially among younger consumers.
The research shows that 59% of adults aged 18 to 54 believe it is becoming increasingly acceptable to have a mortgage later in life, up from 34% in 2021.
Fairer Finance director Tim Hogg says: “It’s important to help people save more for their retirement, but if we focus solely on pensions we’re overlooking an important asset that millions of households already own.
“Our research shows that large numbers of people heading towards a retirement income shortfall have significant housing wealth that could bridge the gap, if they so choose.
“The picture is particularly grim for single women, who are most at risk of low living standards in retirement, despite often owning homes worth hundreds of thousands of pounds.
“We need policymakers, regulators and businesses to work together to overcome the barriers that prevent people from seeing their pensions and their assets as part of the same financial picture.”
Jim Boyd, CEO of the Equity Release Council, said: “Following the Pensions Commission’s recent warning that 15 million people are not saving enough for retirement, Fairer Finance’s research explains how home equity can provide a lifeline for our rapidly aging population and transform retirement living standards.
“As attitudes towards later life lending continue to evolve, it is vital that people have access to clear information, appropriate advice and products with strong safeguards so they can make informed choices about what is right for their circumstances.
“The challenge now for government and regulators is to create a system that helps consumers consider all their options in the round and use their assets more effectively to support financial well-being in later life.”