The former pensions minister Steve Webb gives his views on why downsizing your home to increase retirement income is an unrealistic goal.
Steve Webb told the BBC that this retirement plan could best be described as ‘downsizing delusion’ which is a worrying statement for the three million people planning to rely on their homes for a pension. “Most people doing so would experience a slump in living standards on retirement”.
Downsizing isn’t always an easy option, especially if you’re still paying off the mortgage.
In London and the South East “If someone sold a detached house for the average price of £310,000, and traded down to a semi-detached for £197,000, they would have £113,000 with which to buy a pension. That sum would buy an annuity that pays out £5,700 a year, without annual increases for inflation. Including the value of the state pension, that would make an annual income of £13,700, half the average wage of a full-time worker in the UK”.
Downsizers in the South East can expect to see 61% of their pre-retirement income.
Stephen Roberts of Robson Lister Wealth Management told the BBC that “Saving through a pension which can be invested across a range of assets is a much wiser long-term strategy”.
Pension’s expert Tom McPhail of Hargreaves Lansdown commented that “Annuity rates, which have been falling for many years, have dropped a further 3.5% since the vote to leave the EU which lowers the potential income further”.
If you are planning to top-up your retirement income by downsizing your property, now is the time to remortgage. Take advantage of the fantastic low rates and competitive mortgage market place to reduce your term. Call our friendly advisers today for a no obligation chat on 01273 736536 or fill out our contact form.