Brits relying on property for retirement income

Posted: 21 Jul 2006 10:01:52 GMT

A new survey indicates that a significant proportion of British homeowners see their own property as central to their retirement income.

Research by Mercer Human Resource Consulting shows that 33 per cent of those with defined contribution pension schemes will in fact rely on their house when retirement comes around.

But Mercer has suggested that this confidence may be misplaced and that property will not always prove to be a safe bet.

The average UK house is worth around £173,000 and this could be sold to buy an annuity worth approximately £6,700 a year after tax, it is claimed.

Average rental costs, however, are £6,800, meaning that this annuity would provide a negative net retirement income.

The analysis also shows that people downsizing from an average semi-detached home to an average terraced home would be able to buy an annuity of only £1,100 a year after tax.

Dr Deborah Cooper at Mercer remarked: "People with expensive houses who will be able to downsize are unlikely to be those who are relying on their homes as their main source of retirement income.

"For most defined contribution scheme members, selling a home to buy an annuity will provide little income, if any at all, once rental or re-purchasing costs have been taken into account."

On the other hand, the buy-to-let sector in the UK is booming, with many investors gaining rental income and accumulating capital growth for many years before they retire.


© Houseladder Ltd




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