Millions May Need Property Wealth to Fund Retirement: What It Means for Advisers

The UK is facing a retirement funding crisis. A recent report by Fairer Finance, commissioned with the Equity Release Council, reveals that by 2040 more than half of UK households (51%) will need to access their property wealth to fund retirement. This finding signals a profound change in how we think about later-life income, and raises urgent questions for policymakers, advisers and homeowners alike.

The Retirement Income Gap

For decades, pensions have been the cornerstone of retirement planning. But today, that is changing. Why?

• Shrinking pension pots as fewer workers benefit from generous defined benefit schemes.
• Rising longevity, which stretches income needs further across retirement.
• Higher living and care costs, outpacing both state and workplace pension provision.

Fairer Finance warns that nearly 38% of future retirees could end up with incomes below the Pensions and Lifetime Savings Association’s “minimum” standard (£13,400 for a single person per year/£21,600 for a couple). 

Why Housing Wealth Holds the Key

For most homeowners, their property is their biggest asset, often outweighing the value of their pension savings. According to Fairer Finance, unlocking housing wealth could, in theory, inject up to £23 billion per year into the economy by 2040. This would contribute around £21 billion annually in gross value added (GVA).

Releasing equity through downsizing or later-life lending could help households maintain a decent standard of living well into retirement. For many, housing wealth could form part of the solution to bridging the retirement income gap, although equity release is not suitable for everyone. It may affect entitlement to means-tested benefits and reduce the value of estates.

Policy Changes Are Needed

To unlock this potential, Fairer Finance outlines five urgent policy changes:

• Boost available housing supply tailored to older people who are looking to downsize.
• Reduce stamp duty when downsizing to make moving more attractive.
• Embed housing wealth in mainstream online retirement planning tools like MoneyHelper and Pension Wise.
• Create a single financial dashboard, showing pensions and housing wealth together.
• Reform financial advice rules so that both mortgage and retirement advisers address property wealth as standard.

These changes could normalise housing wealth as a legitimate retirement pillar, alongside pensions and savings.

A Fourth Pillar of Retirement Income?

Traditionally, retirement income has rested on three pillars:
• State pension
• Workplace pensions
• Private savings/investments

Now, many experts argue that housing equity should become the “fourth pillar”. It won’t replace pensions or savings, but it can complement them, bridging the gap between rising costs and limited income streams.

Risks and Considerations

While property wealth offers huge potential, it’s not without its challenges. For example, the cost of releasing equity such as interest roll-up and fees, and the emotional barriers to downsizing. Due to uneven access to advice, many retirees are unaware of their full options. Tailored advice from a qualified adviser will be essential to ensure housing wealth works for, not against, consumers.

The message is clear: property wealth will play a central role in funding retirement for millions of UK households. By 2040, more than half of retirees may depend on it.

Are you integrating housing wealth into your retirement planning conversations?