Over 50s' pension pots could be reduced by hundreds of pounds if interest rates rise this week, according to new research from LV=, but equity release could help to plug the gap, despite falls in house prices.
A rise in interest rates would see many over 50s being forced to reduce the amount they put into their retirement savings to cover the increased repayments on debt, but equity release could help to boost retirement income, LV= suggests.
The retirement specialist has found that if interest rates rise when the Monetary Policy Committee meets this week, 40-50 per cent of over 50s who are still working said they would have to reduce their pension contributions to make ends meet.
Pension pots would suffer while workers have to set aside more money to keep up with the higher cost of lending, with increased mortgage, credit card, and loan repayments.
LV= found that 44 per cent of all over 50s who work, and 34 per cent of those aged 60-69 who are still working, still have outstanding mortgage debt, despite approaching retirement age.
An interest rise which reduces their pension pot would come as a double-blow for the 1.2 million working over 50s who intend to use their property to help fund their retirement, as half have said their properties have fallen in value by more than £21,000 in the last three years.
Commenting on the findings of the research, Vanessa Owen, head of equity release at LV=, said: "It's worrying that a rise in interest rates would force many people nearing retirement to reduce their savings. With the extra strain a rise in interest could bring, our research shows that many people believe their property is the best chance they have to fund a comfortable retirement, despite the recent fall in property values.
"Someone's home is often their greatest asset, and if they are struggling to build up an adequate pension pot it's a sensible option to take professional advice on how using the value of your property can help fund your retirement.
© Fair Investment Company Ltd
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