Reaching the point where home is where the pension is

Kirsty Mcluckie on the role of equity in financial planning

ore than half of homeowners aged 45 and over see money invested in property as part of their financial plans for later life, according to a new report from the Equity Release Council.

“Beyond bricks and mortar: the changing role of property in later life financial plans”– supported by Key, the equity release adviser – examines trends in UK property wealth and how it is impacting homeowners’ outlook in later life both in terms of managing their own finances and supporting younger generations.

It shows that older homeowners, particularly those aged 45 to 64, the retirees of tomorrow, are reassessing the traditional roles of property in retirement funding and inheritance.

Older age groups are not just the biggest owners of property; they also depend the most on its contribution to their overall finances.

Bricks and mortar accounts for 40p in every £1 of household wealth for those aged 65 and over.

The report suggests that these shifting trends are driving a change in attitude among the over-45 homeowner population.

Many are facing multiple financial challenges as they seek to live longer, healthier lives while balancing their needs with providing support for the younger generations.

The retirees of tomorrow are less likely than their older counterparts to see property as something to leave behind as an inheritance.

Instead, they are more likely to think of it as a multi-purpose financial tool that can support their own financial plans, be used as a nest egg to meet unexpected expenses or help family members.

David Burrowes, chairman of the Equity Release Council, commented: “The UK’S ageing population and changing retirement landscape means people are increasingly thinking of property as a multipurpose financial asset.

“Property is often a person’s single largest asset and makes a significant contribution to homeowners’ personal finances as well as providing a place to live.

“While drawing on property is not right for every circumstance and should not distract from encouraging long-term saving – it should be on every homeowner’s checklist to consider in later life.

“We urge industry and policymakers to evolve their thinking to reflect that of older homeowners to support this emerging demand.”

Using you home’s value in your financial planning for later life might not be open to future generations however, particularly if they can’t rely on inheritance to buy a property.

Research by Verismart this week has looked at what point in the future the UK could lose its homeowner status as the scales tip towards a greater number of rental sector occupants compared to owneroccupiers. Data shows that since 2010, the percentage of owneroccupant homes has fallen by 5 per cent, while the percentage of those living in the rental sector has grown by the same number.

Homeowners still account for 65 per cent of the market, but should the trend of the last seven years continue, the scales would tip in favour of tenants by 2039, with 50.7 per cent of us renting to 49.3 per cent owning our own home.

Forget Generation Rent, maybe we are heading for just Nation Rent.

@Scotsmankirsty