One in four retirees will raise £62k through downsizing
One in four retired homeowners hope to raise an average of £62,000 by moving into a smaller home, according to research by Prudential.
The retirees said their main reasons for wishing to downsize were convenience, raising money to increase their income in retirement, and cutting bills.
Nearly three quarters (73%) of the UK's 10.4 million pensioners own their own home, with 26% stating that they expect to sell their property to raise money or simply to make their life easier, according to Prudential.
While four in every five (81%) who expect to sell are planning to buy another property, the majority (73%) want to move into a smaller and less expensive home. On average, they expect downsizing to raise as much as £62,000.
Stan Russell, retirement expert at Prudential, said: "Housing wealth is potentially a significant source of additional retirement income for pensioners who own their own home. However, it is dangerous for people to assume that housing wealth can make up for a lack of retirement planning.
"To ensure a comfortable retirement it is important to start saving as much as possible as early as possible, and to seek professional financial advice on the best retirement income options."
Nearly a quarter (23%) of those surveyed said they plan to use the money raised to boost their income in retirement, 13% will pay off debts and 8% say they'll use the money to help with everyday living costs.
Prudential's research also shows that over one in five (22%) retired homeowners still have an outstanding mortgage, with average monthly payments of £254.
"For some retired homeowners, moving to a smaller home is a lifestyle choice, but for a significant number the decision is a financial one," Russell continued. Our research also shows the financial nous of many pensioners - the majority of retired homeowners expecting to sell their property plan to buy a smaller home rather than rent, saving themselves on average £168 per month on the difference between average mortgage and rental costs."
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.