Property not an alternative to pensions

29 October 2004
People have once again been warned they are not saving enough for their retirement, as for many the equity tied up in their homes will not be enough to live off.

A new report from the Pensions Policy Institute (PPI) suggests that people can not simply rely on their property and must therefore look to save more in pensions.

The PPI warns that not all housing equity can be transferred into income. This is because equity release products normally only allow 20 per cent of the house value to be achieved at age 65

The director of the PPI, Alison O'Connell says: "For most people, property will be at best a complement to occupational or personal pensions, not a substitute."

Explaining the situation, she adds: "Today's average levels of pension saving (around 7-8 per cent of salary a year) could only be enough to fund a two-thirds final salary retirement income for a forty year old if he or she can release equity from an average value house and retire at age 67."

The PPI's report, 'Property or Pensions' suggests that while many believe saving through property is an alternative to a pension, only the very wealthy can get away with it.

Everyone else needs to save additional assets if they are to secure a decent retirement income.

The report adds, in money terms, most houses are worth less than £130,000, while only 10 per cent of homes are worth more than £330,000.

This is the amount of money needed for equity release to provide an income of at least £100 a week, according to PPI.

To find out more about personal pensions, click here.
© DeHavilland Information Services plc