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Home Finance Londoners lead the way as one in five plan to downsize to fund retirement

Londoners lead the way as one in five plan to downsize to fund retirement

by Staff GBAF Publications Ltd
  • Almost one in five (19%) people plan to downsize in retirement. Only two in five (40%) have ruled it out altogether.
  • There were big regional variations with over one third (35%) of Londoners saying they planned to downsize compared to just one in ten (11%) people in Scotland.
  • It’s an option people often consider, but as they get close to retirement many decide against it. In our survey 21% of people aged between 25-34 said it was an option compared to just 11% of those aged 65-74.
  • 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.

Survey of 1500 people conducted by Opinium on behalf of HL in April 2022.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“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.

The other key factor to consider is that you may not make as much money from downsizing as you first thought. 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. Even those living in London with its sky-high property prices may find they need to move a considerable distance to get their home and their retirement income sorted.

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

The advent of auto-enrolment means more people will approach retirement with pension savings. Building up a good level of pension over the course of your working life means you can plan for the future without having to worry about having to make big decisions like downsizing to plug any potential gaps in income.”