Homeownership trumps retirement plans, research suggests
A survey reveals that almost half of adults would sacrifice their retirement if it meant owning their own property.
Older people are sacrificing their retirement to own their home outright, research suggests.
A survey of 2,000 adults found that 45% cite outright home ownership as the most important factor for retirement security, compared with 36% who prioritise a large pension pot.
When asked to choose, 51% said they would delay retirement to own their home outright. Only 9% would opt to retire earlier if it meant renting in later life.
The findings come as a major report from the Pensions Policy Institute (PPI) in July, commissioned by the Association of British Insurers, warns that the British pension system was built around a dwindling assumption that most people will enter retirement with no housing costs because they own their home outright.
Almost two million more pensioner households are projected to be renting by 2044, the PPI report said.
The difficulty of achieving the twin major life goals of home ownership and decent pension savings has never been so apparent.”
Meanwhile, many buyers are opting for longer-term mortgages that can spread the cost of repayments but that means more could be paying off the debt later in life.
Retirement savings brand PensionBee, which conducted the survey, also asked whether people would support a government scheme allowing pension savings to be accessed specifically to fund a first home purchase.
Half of those aged 25 to 34 said they would consider using it if it existed. PensionBee’s modelling shows that the opportunity cost of redirecting £20,000 from a pension at age 30 in this way could be more than £120,000 in lost retirement savings by age 67. It is the costliest trade-off for the age group most likely to take it up, and the group least likely to understand the long-term consequences.
Only 19% of respondents feel very confident their pension will cover their housing costs in retirement, while 37% are either not confident or have not thought about it at all.
Retirement rethink
Becky O’Connor, Head of Pensions at PensionBee, says: “These findings reflect a housing crisis that has reshaped how a generation thinks about retirement. People prioritising homeownership over pension saving might be making a rational financial decision, as owning your home outright removes one of the biggest costs in retirement.
“However, the problem is that rising house prices have made that goal significantly harder to reach, and the consequence for many will be that retirement starts later, or that they arrive at retirement still carrying housing costs they had hoped to have cleared. For many, the home ownership goal will continue to evade them and then the question will be can they boost their retirement savings by enough to cover the cost of renting.
“The difficulty of achieving the twin major life goals of home ownership and decent pension savings has never been so apparent and the prospect that a sizeable proportion of people will not manage to achieve both is something that policymakers cannot ignore.”
