Using your Property to Boost Retirement Income


Posted on: 11 December 2018 by Fletcher Day

In light of recent unnerving statistics which revealed that 78 percent of over 55s in the UK feel unprepared for retirement and 41 percent saying their hopes for a comfortable retirement are no longer possible, a rising number of baby boomers and traditionalists are now seeking alternatives in the form of property to secure a steady income stream throughout retirement.

Most of us will rely on our annual salary and pension pot to fund our comfortable retirement, but in reality it often isn’t as straightforward as this and people can often face a significant income shortfall. Thankfully your own home can help to boost your retirement income.

You don’t have to funnel your money into savvy property investments to reap the benefits – your family home can play a huge part in retirement planning if you play your cards right. With 63 percent of people now recognising that their home is worth far more than their pension ever will be and as house prices continue to soar, it is no surprise as to how many people are now choosing to take advantage of the capital tied up in their home in a bid to bolster income during retirement.

Equity release solutions

Typically downsizing is the most popular way to access and release equity in a property, however there are a number of different options available which will help fund your retirement. Whilst selling up and moving into a smaller (and cheaper) property seems easy enough to do – especially with a thriving property market – it can often be difficult for sentimental reasons for people to sever the attachment they have to their family home.

Paired with the hidden costs of moving house, downsizing to release equity simply isn’t a viable option for some. Luckily there is another way in which you can access the equity in your property through an equity release plan. However only 6% of retirees said that they would use an equity release plan to subsidise their pension pot due to the deep-rooted stigma attached to the solution.

Lifetime mortgages have also proven popular when it comes to equity release in more recent years and this is because they offer retirees more flexibility compared to both out-dated reversion schemes and traditional mortgage agreements. With a lifetime mortgage, you can take out a loan that is secured against your property, then the interest and the loan itself are repaid upon the resale of the property.

Rental schemes

For many people, selling up isn’t practical and this is why a rising number of retirees are now taking advantage of alternative opportunities such as renting out a room. Currently the rental market is extremely strong and offers some of the most lucrative returns, making it the ideal opportunity for retirees looking to bolster their retirement income without selling their property. Renting a spare room to a lodger is a great way of securing a steady and profitable income stream and under the governments Rent a Room Scheme, you can earn up to £7,500 each year – and as an added bonus, you don’t have to pay any income tax!

Despite the wealth of opportunities available when it comes to boosting your retirement income, it is important to remember that both equity release and rental schemes should not be regarded as an alternative to saving, but instead, a solution to help top up your income in order to make retirement as comfortable as possible.

Fletcher Day are a commercial law firm with a specialist team of property lawyers in London

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