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Can £750bn of property wealth avert a pensions crisis?

Funding longer retirements and hefty long-term care bills means more pensioners will be forced to look at making their property pay.


by Michelle McGagh on Jul 16, 2012 at 09:17

Can £750bn of property wealth avert a pensions crisis?

Britons are saving less into pensions, but the trend for ploughing money into property continues. Billions of pounds are tied up in UK property, and with people living longer and retirements expanding, an increasing number of people will have to dip into their housing equity as their pensions come up short.

Many people coming up to retirement are finding themselves asset rich but cash poor, and thanks to a decade of property price rises much of their wealth is tied up in their homes.

Equity release is essentially a way of getting at that money by taking out a loan that uses your home as collateral. The loan can either be paid out as a lump sum or as monthly income.

Homeownership is at record levels in the UK, and those over 65 have an estimated £750 billion invested in property. Some 84% of people in their 60s and 70s own a home with at least £200,000 of equity in it, according to research by insurer Just Retirement.

Despite the amount of wealth in their homes just over half, 51%, of those approaching retirement expect to feel ‘comfortable’ in retirement, and only a third believe they will be comfortable in 10 years' time after inflation has taken a toll on their money.

Expectations versus reality

The research found that most people expect an annual income of £17,000, a far cry from the £10,000 annual income the average retiree receives.

Stephen Lowe, group director of external affairs and customer insight at Just Retirement, said there was a huge gap between pension expectations and retirement reality – and equity release could help to bridge the gap.

‘There is clear evidence of a pension income gap, a shortfall between an actual income and one that provides an acceptable standard of living,’ he said. ‘The expectations of baby boomers are not realistic – there is an expectation-reality gap.’

Lowe added that property would have to be seen as part of an overall ‘wealth pot’ if baby boomers want to bridge the gap between what they want and what they will get in retirement.

As money can be dripped out of property monthly, equity release can help people to top up their pension income bit by bit, rather than siphoning off a lump sum of money out of the home.

We’ve spent the inheritance

As people save less and generous defined benefit pensions are phased out, more Britons will be wondering how to fund the retirement they want.

One trend the Just Retirement research unearthed was a change in attitude to housing wealth and inheritance.

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20 comments so far. Why not have your say?

Paul Barrett

Jul 16, 2012 at 14:18

Well if you have a 3 bedroom property you would have 2 spare rooms.

Rent them out at say £650 per month each.

Nice bit of income.

No one will know.

Beats downsizing or equity release.

Though of course it does mean an element of lost privacy.

In general though most professional RFR tenants work hard, come back latish, have somthing to eat , go to their room, go on the lap -top then to sleep.

Weekends they are mostly out.

In my experience you hardly see them.

£!300 very nice tax free income

Plus if they are nice lodgers they can be a bit of company.

There is massive demand for decent houses with spare bedrooms.

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Jul 16, 2012 at 14:44

"Nice bit of income.

No one will know."

Best keep it legal, eh? Under the "Rent a Room" scheme you can have up to £4250 a year gross without telling the taxman, above that you'll need to declare the income.

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Michael Peters Fenwicks

Jul 16, 2012 at 15:15

Risky strategy due to over concentration of wealth and one pony one trick should the housing market fail to deliver returns.

I say diversify as better to have two baskets then one as a way of managing risk in the long term.

Sometimes too clever can be stupid.

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alan franklin

Jul 16, 2012 at 15:21

Equity release is not so good for your heirs.....

We downsized, released cash, gave a lot away, then invested the rest, giving a decent income stream.

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Jeremy Bosk

Jul 16, 2012 at 16:08

£650 a monthly rent for one room? Maybe in London. In my street, in a northern town which is relatively well off in the recession, a whole, fully furnished two bed terrace is on offer for £450 a month.

See Tory Prime Minister Benjamin Disraeli's novel, Sybil or the Two Nations. That was published in 1845. Modern Tories neither know nor care about the disparities in wealth and income.

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charlie 12

Jul 16, 2012 at 17:09

..."a decade of property price rises" - care to step outside the south-east, Michelle and do a spot of research? For most people a house is a roof over your head and not an investment. A bit of downsizing/equity release will give an injection of cash for the short term but will not keep the wolf from the door throughout retirement.

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Paul Barrett

Jul 17, 2012 at 06:04

No sod legal go tell it to the -ankers

What you choose to do in your own PPR is your own business.

No one rents their room for £4250 per year.

Do you realise that works out at £10.78 per day not including usage of utilities and normal household consumables ,et al,

This is how it works

£4250 - SPD for council tax = ££3925 divided by 52 weeks = £75.50 divided by 7 days = £10.78 divided by 24 hrs = £0.45 p hr.

Would you give up your privacy for such derisory returns; keeep it legal my arse!!!

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Jul 17, 2012 at 09:50

It's nothing to do with "privacy". The UK tax system works on self-assessment. "No one will know" about any of your taxable income or gains unless you declare it and if you take that attitude to rental income, I hazard a guess that applies across the board. Not only does that risk a tax investigation and potential penalties and even imprisonment, it also means more has to be paid by the rest of us and, if we all did it, we'd end up like Greece. A rather strange attitude to find on a website aimed at Financial Advisers and Wealth Managers!

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Paul Barrett

Jul 17, 2012 at 11:00

Yeah right I'm sure HMRC are going to imprison a pensioner for having a lodger paying more than the RFR scheme.

Wake up mate this is the real world.

When bankers and companies stop using offshore tax havens to avoid tax then HMRC might come after a pensioner charging a lodger more than £4250 per year, until then I say stuff the HMRC.

In fact did you not see Dispatches the head of HMRC was a director of one of these offshore scams!!

Address the real tax evaders in the City and companies like Philip Green and that means not little old pensioners struggling to make ends meet.

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Jul 17, 2012 at 12:00

Tax evaders are tax evaders. Whether you're a "little old pensioner" or a tycoon, if you're not declaring income or gains in order to avoid tax, then you're as bad as each other. It's illegal and it's immoral. What's not to understand?

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Paul Barrett

Jul 17, 2012 at 13:15

No don't agree, get the big tax evaders and then there little one's might not do so.

Until big corporations and banksters pay proper tax and do not avoid it by offshore facilities I for one will NOT be paying tax if I can possibly help it.

I am one of the very liitle prople.The amount of people who would rent ot a spare room in their own PPR is miniscule.

Tax lost is insignificant compared to what the banksters and big corporations have been getting away with for many years.

Morality has nothing to do with it, nobody would pay tax if they could avoid like the banksters and big corporations do.

Change the law to stop tax avoidance schemes that i think are being introduced and then you can can look at taxing a little pensioner.

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Jeremy Bosk

Jul 18, 2012 at 18:17

It is a lot easier and more cost effective to go after the little people. Private individuals cannot resist bragging about their tax fiddles. They then fall out with friends, relatives, neighbours and are turned in for very little effort on behalf of HMRC.

By the time HMRC finds sufficient evidence against the big boys, the leaders are in an unextraditable jurisdiction and the companies have been bankrupted by looting executives and lawyers' fees. Lawyers are the only winners, shareholders and customers the main losers.

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Jul 18, 2012 at 18:42

It doesn't matter whether you're a "little person" or a "big boy", it's still wrong! It seems to me that this website - aimed at IFA's and wealth managers - is a completely inappropriate forum to be advocating non-disclosure as a valid investment strategy.

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Jeremy Bosk

Jul 18, 2012 at 20:54


Isn't the site divided into sections including this part aimed at retail investors?

I agree with you on non-disclosure. Unfortunately, a large section of the population believe that those who obey the law when there is no possibility of being found out are fools to be exploited. HMRC officials can read these pages as well as you and I can. Which goes back to my earlier point about small time cheats being loose lipped.

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Jul 22, 2012 at 11:26

There are an aweful lot of baby boomers who own 2nd, 3rd or even a string of properties which they rent out (buy to let) specifically for their retirement, having lost faith inn traditional company pension schemes and for that matter private pensions (extortionate fees for little return). I would guess that most of these are on interest only laons with whatever capital needed for each new purchase raised from increases in value to their previous portfolio additions. But what will happen when these baby boomers retire? Are the mortgages solely dependant upon rental income? Are the holders of such mortgages required to be in receipt of independant income? Will there be future requirements to turn these mortgages into repayment types? They too would be forced to sell if they need care!! There is no escaping. Best then to investigate private care homes and the extortionate fees they charge. Retirement to A REASONABLE HOTEL WOULD BE CHEAPER!!

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Prof Eman

Jul 22, 2012 at 14:53


A Citywire article on best providers of Equity Release would be useful to a number of us.

Please oblige.

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Jeremy Bosk

Jul 22, 2012 at 15:46


Buy to let is the next property crash. After a period of rising interest rates and falling non-property income, many BTL landlords will be unable to maintain their properties or service their loans.

The widely visible creation of new slums and the associated disease from damp, mould etcetera will force state intervention. There will be either outright nationalisation or, more probably, huge subsidies to social landlords (housing associations) as back door nationalisation.

The BTL landlords will see their properties sold from under them at a loss and be left with debts.

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Jul 22, 2012 at 23:27

Typical of the shyster govts, never adjust for true reality, so they can screw more money from the householder. Infringement of HR, not that the govt or HMRC will ever acknowledge, they want their pound of flesh and 10 gallons of blood, never mind a drop (of blood).

If the ne'er do wells can get it for free, having never saved for retirement or twilight years provision, having paid your just dues throughout your working life, the govt will nevertheless screw you, every which way.

Now if a millipede /spherical objects, they will hang on to every sou they unjustly voted themselves or stole from the taxpayer, but will bleed you dry, and make you pay more to support their voters, and the illegal immigrants.

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Jul 23, 2012 at 10:23

The Government spends £8bn on foreign aid.

Under recent proposals, it would cost the government £1.5bn to pay for care for the elderly.

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Jeremy Bosk

Jul 23, 2012 at 10:50

There is plenty of money in this country to pay for both. What is lacking is the political will.

Overseas aid does several good things besides the humanitarian aspect. It buys influence and increases our exports. Given that we are no longer a significant military power, influence is all we have to protect our interests abroad.

It also helps limit damage to the world environment and slow global warming. This keeps our food and raw material costs down.

A developing world destroyed by over population, famine, drought, bad government and all the things so familiar from the news will surely add to the flood of refugees.

Foreign aid is in our own economic interest.

I expect a chorus of denial from the far right. If Tories had a heart, a conscience and any thought for the future, they would not be Tories.

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