The issue is particularly acute in London, with 56 per cent of homeowners saying they plan to use their property to pay their way through retirement, according to research by Annuity Ready.
Many older generations bought property when it was far cheaper than it is today, with those in London often sitting on properties worth hundreds of thousands of pounds more than they were bought for.
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It comes as around 15 million people are believed to be under-saving for retirement, with retirees in 2050 on course to receive around £800 less private pension income than today’s.
Sarah Lloyd, commercial director at Annuity Ready, said: “Many people are banking on their homes to support them financially in retirement – whether that’s through downsizing, equity release or letting out a spare room.
“This is all the more reason why we’re urging people across the UK to take stock of their finances early and get clear on their options.”
‘I’m 46 and not planning to save into a pension’
Jazz Gandhi, 46, is one such person who is not planning to save into a pension for retirement – instead prioritising her property as a means to get by.
She said: “Many employees move between jobs and pay into a pension scheme, so managing that pot becomes complex,” adding she will not invest in a pension aside from paying National Insurance contributions to claim the state pension later in life.
Jazz Gandhi said she is relying on property for her pension (Jason Joyce)Jazz, a PR director, bought a flat in West London in 2008 and is “quietly confident” it will hold its value.
“I’ve also chosen to be single and child-free so my property assets should be enough to help fund a comfortable retirement. But I’ll probably end up working to cover bills anyway.”
She said investing in traditionally tax-free options like champagnes and wines is one of her preferred ways to hold tangible assets but added she is not a high net worth individual.
“I was raised in poverty in this country, but I have been taught by my mother how to make the pound stretch, and to budget wisely. Financial anxiety is not discussed enough in our workplace or country.”
How to build up retirement savings
Contributing to a workplace or personal pension is a great place to start. By contributing to a workplace pension, you benefit from free cash from your employer and also the government via pensions tax relief.
By contributing to a personal pension, you will not get employer contributions, but will still get pension tax relief.
Investment firm M&G found that someone who begins saving at age 23 could build a pension pot worth £596,000 by retirement age, assuming they consistently contribute around 8 per cent of their salary.
‘Our pension pots won’t be enough’
Renata, 57, from East London, said she plans to rent out her home in London to fund her retirement, as she does not have enough pension saved.
She and her husband have lived in the area for the best part of 30 years and have two grown-up sons.
Over the last few years, they have been taking stock of their finances in preparation for retirement, including savings, property-based assets, pension pots and other sources of income they might be able to draw upon once retired.
“My husband and I plan to use property to supplement our retirement income, mostly through renting,” she said.
“Having been partly self-employed for the last two decades, our pension pots alone likely won’t be enough to get us through retirement, so having property to tap into will be helpful.
“But buying in London is much harder now; people are paying a lot more for a lot less. So, using property for pension income might not be as accessible for future generations.”
The minimum you can contribute through auto-enrolment is 8 per cent, with a minimum of 5 per cent from you and 3 per cent from your employer – although your employer can choose to pay a higher split, for example, 4 per cent each.
Anusha Mittal, managing director of individual life & pensions at M&G, said: “Starting to save when you begin working is one of the most powerful financial choices you can make.
You could also consider tracking down and consolidating lost pots to ensure you don’t miss out on any pension savings and that you are paying the lowest possible fee.
If you moved a £20,000 pot from a scheme charging one per cent interest to a scheme charging 0.25 per cent, you would save £1,500 over 10 years – without factoring in pension growth.
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