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One in five plan to downsize to fund retirement

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24/05/2022
Downsizing can unlock property wealth, but moving home can also be more costly than you think
One in five plan to downsize to fund retirement

Almost one in five (19%) people plan to downsize in retirement, according to new research from Hargreaves Lansdown.

And only two in five (40%) homeowners say they have ruled it out altogether, said the investment platform.

There were big regional variations in the research, with over a third (35%) of Londoners saying they planned to downsize compared to just one in 10 (11%) people in Scotland.

Of those who decided against downsizing, one third (33%) said they were too attached to their home. A further fifth (22%) said it was too expensive. Another 22% said they already had enough money. Equity release was an option for 8% of people.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Downsizing can seem the ideal way to plug retirement income gaps but the reality of actually doing it is much harder than first thought.

“Moving to a smaller property can look like a sensible choice, the children have left home and you have spare room, but the emotional pull of leaving the home you’ve raised a family in can prove too much.

“This is especially the case if you have friends and family close by – you are unlikely to want to move away from such a valuable support network, particularly as you get older when you may be in more need of support”

Cost of moving

Hargreaves Lansdown also warned that homeowners may not make as much money from downsizing as they first thought.

Morrisey explained: “You may have benefited from enormous house price growth over the years but house moving is expensive at the best of times and once you have totted up the legal fees and stamp duty you might find a huge dent has been taken out of your profits.

“If you are looking to move to a smaller property nearby then you may find your budget just doesn’t stretch far enough to cover the cost of your new home while leaving you with a retirement lump sum. Unless you are moving from a house to a flat then you could struggle.”

Other options

There are other options for people looking to use their property to support their retirement income – just under one in ten people said they planned to use equity release. This can be an option as long as you consider the fees involved and that they roll up over time and have planned for this.

It’s a good idea to take specialist advice beforehand to ensure you understand what it means for you.

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