Over 7.5m people - or one in every eight of the UK population - are relying on their house to fund the major part of their retirement income even though more than 1.5 million won't clear their mortgage until they are 65.
A survey by Lincoln Financial Group of 2,007 adults reveal 51% of homeowners think their home is a major asset for providing for retirement after their pension, although Lincoln says people are leaving it late as the average age for people to clear their mortgage is at least 56.
Lincoln Financial says this is the equivalent of 1.58m people not being mortgage free until they are aged 65, while a percentage of those representing 980,000 of the UK population think they will still be paying off their mortgage after they have reached the state retirement age.
In addition, it is thought, based on this research, 309,000 people will not clear their mortgage until they reach 70, although on the bright side Lincoln suggests 481,000 people might expect to be mortgage free by the age of 45.
Although the average age to have paid off a mortgage is now 56 and a half across the country as a whole, Lincoln Financial says people living in Greater London are likely to have to wait the longest with an average age of almost 58, while those in the North East, Yorkshire and Humberside expect to clear their debt two years earlier at the age of 55.
Meanwhile although 51% of respondents say they regard their home as their major asset, 36% say they have other assets beside their house, a figure which rises to 57% for those nearer retirement between the ages of 55 and 64.
But Lincoln says the research reveals a worrying picture for homeowners if they are concentrating on paying off their mortgages rather than building up additional savings to their pensions.
Ian Noble, head of strategic partnerships at Lincoln Financial Group, says it many people seem to be relying on their homes to fund their retirements on top of their pension.
He says: “it can be difficult building up other savings while paying off your mortgage and also investing in a pension. But it is potentially risky to believe your home will provide for your retirement if your pension is not sufficient.”
Noble points out there are issues to consider when using equity from a home such as having to move to smaller house in a different area, which many people may not want to do, while there are also technical issues including inheritance tax (IHT) to consider when reinvesting any equity.
He adds: "It can therefore make sense to build up savings while you are working and possibly to defer clearing your mortgage. We would urge everyone to seek advice on planning for retirement and to think through savings and investment plans. With a bit of luck you will be a long time retired so it makes sense to plan.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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