Guide to using property to fund retirement

  • Understand how equity release works and how it can be used to fund retirement.
  • Learn whether buy-to-let investing is a suitable way to plan for later life.
  • Comprehend the difference between property shares, Reits and commercial property funds and the pros and cons of each for a retirement portfolio.
Guide to using property to fund retirement


Property has traditionally been seen as a robust investment in the UK, with its ability to generate returns and produce income.

And the Brits have a rather unique relationship with bricks and mortar, with many seeing a house purchase as a form of pension or a reliable long-term investment, and not just a home.

Steve Ellis, managing director at Legal & General Home Finance, observes: “Property wealth is playing a more prominent role in retirement as the dynamics of later life are changing. 

“More of us are living longer, sometimes 30 or even 40 years in retirement, and with the decline of defined benefit schemes, for many people their pension alone is no longer enough to help cover the costs of later life.”

The Office for National Statistics recently published a Wealth and Assets survey revealing 49 per cent of respondents considered property to be the most effective way of planning for later life and making a solid return on their original investment, 3 per cent more than did in the previous survey covering July 2014 to June 2016.

Annuity can be an option for some, but Mr Ellis asks, couple these changes with significant and sustained property inflation over the past four decades and the question is – why aren’t more of us considering our property wealth as a retirement income? 

Jon Greer, head of retirement policy at Old Mutual Wealth, notes in response to the latest Equity Release Council figures, housing wealth is starting to play a crucial role in personal financial planning.

“A person’s home is not only their largest physical asset, it is also holds the majority of their wealth,” he points out. “Property looks set to be a fundamental means for people to fund their retirement.”

Recent research by Old Mutual Wealth and Tisa shows people aged 50 and over were approaching retirement with a funding shortfall of £11,400 per year and when asked if the home should play a role in financial planning, 68 per cent of the 1,000 surveyed said yes.

But Mr Greer suggests: “However, it is crucial to take advice as relying on your home in retirement is difficult and accessing it isn’t as simple as opening the right door.”

Nick Rucker, private wealth expert at Irwin Mitchell Private Wealth, expresses caution over investors focusing all their retirement planning on one asset class.

He says: "The 2008 financial crisis should serve as a reminder  no market is ever safe. This, paired with the recent stagnation in house prices across the country, should only highlight the need to invest in multiple asset classes rather than relying on one which has traditionally been robust."

The government has been keeping a close eye on the role housing is playing to plug the shortfall people face in retirement.

“It’s therefore not surprising that the Conservatives proposed turning to this wealth to bolster the collapsing social care system in their manifesto,” says Mr Greer. “The proposals included including the value of a person’s home in means-testing for support and encouraging people to use the equity in their homes to pay for care.”

This is a trend that is not going away then and lenders have been responding, Mr Ellis acknowledges, with more providers entering the market, rates being reduced and increased flexibility among existing products in the retirement lending market.

This guide will consider how equity release can be used to fund retirement and the growth of the market, as well as the pros and cons of purchasing a buy-to-let property as part of later life planning.

The guide will also look at what happened to property funds in light of the EU referendum and whether property shares are a more efficient way of accessing the asset class.

Contributors to this guide include: Dean Mirfin, technical director at Key Retirement; Alice Watson, head of marketing at Retirement Advantage Equity Release; Jon Greer, head of retirement policy at Old Mutual Wealth; Steve Ellis, managing director at Legal & General Home Finance; Stuart Wilson, channel marketing director at more 2 life; David Hollingworth, associate director at L&C; Tom Selby, senior analyst at AJ Bell; Philip Hanley, director and independent financial adviser at Philip James Financial Services; Alex Gosling, chief executive at; Alex Moore, research analyst at Rathbones; Guy Glover, manager of the F&C UK Property funds; Kenneth MacKenzie, managing partner at Target Advisers; Ian Sayers, chief executive at the Association of Investment Companies; Annabel Brodie-Smith, communications director at the Association of Investment Companies; Alex Scott, deputy chief investment officer at Seven Investment Management; Darren Cooke, chartered financial planner at Red Circle Financial Planning; Nick Rucker, private wealth expert at Irwin Mitchell Private Wealth; Richard Gwilliam, head of property research at M&G Real Estate; Equity Release Council; Old Mutual Wealth; Tisa; FCA; ONS; AIC.

In this guide

  1. The average lump sum released by clients through later life lending is how much, according to Mr Wilson?

  2. Mr Gosling says bricks and mortar is seen by the Brits as a safer investment than what?

  3. According to Mr Moore, property shares and Reits can provide investors with what?

  4. Which one of these real estate investment trusts has increased in size the most since its launch, according to the AIC?

  5. Mr Glover says he expects strong returns from UK commercial property in the second half of the year with total returns being what?

  6. According to Mr MacKenzie, the funds which were more sensitive to the referendum reaction were those exposed to which markets?

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