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Property pensions expected to boost retirement cash

24 September 2014

The number of over 55s ready to rent or sell property to fund their retirement is growing, according to new research.

Around 16% are planning on a property pension – up 3% from last year and the highest level since financial firm Barings started collecting data in 2009.

Around 1.3 million over 55s have plans to let out a buy to let home to boost their retirement savings, says a study by the firm.

The West Midlands is the place with the highest number of over 55s planning to become landlords, with a fifth considering the option.

In Wales, only 5% want to rent – the lowest level in the UK.

However, the firm warns about failing to spread investment risk and counting on property to provide much-needed extra cash for retirement.

Barings Rod Aldridge said: “It is worrying that the number of people relying exclusively on their property to fund retirement has increased again.

“Property can, of course, form part of a diversified investment portfolio but this year’s research indicates that more people are investing in property as a retirement source and this could mean they are too concentrated in the asset class.

“Property prices can be volatile so relying on your home to provide all your income to fund retirement is risky.”

Besides investing in buy-to-let, many over 55s are also looking to downsize to release equity from their homes.

“This could also have an impact on the property market and could push up the price of smaller homes as cash-rich older buyers force first-time buyers and young families out of the market with their spending power,” said Aldridge.

The study echoes other surveys by financial firms that all pointed to over 50s releasing equity from their homes to make their later years more affordable.

“The level of risk involved in expecting to fund your retirement through the use of a volatile asset such as their home or from other properties such as buy-to-let should be fully appreciated and understood,” said Aldridge.

“Investing for your retirement is about long-term planning and as people are living longer, more emphasis needs to be put on how a lengthier retirement will be funded. It is imperative that people diversify their investments through a range of assets which can, of course, include property.”