Housing wealth 'crucial' to retirees

The survey of 2,000 people found of those expecting to rely on their housing wealth in retirement, 25 per cent expected to have no private pension savings at all.

The survey found the majority (63 per cent) of those relying on housing wealth in retirement favoured downsizing to other options, such as equity release or taking in a lodger.

The research comes a month after the government released its housing white paper, in which it aimed to "fix" the "broken" housing market.

However, Now: Pensions pointed out that the paper did not address the issue of retired people looking to downsize.

The Danish-owned auto-enrolment provider found 61 per cent of baby boomers who owned their own home wanted to downsize to supplement their retirement income.

Meanwhile, of those that did not own their own home, 44 per cent said they did not expect to own one by the time they retire. 

In the North East there is an abundance of flats, so it's not something you can generalise across the UK.David Smith

Of those, nearly half (47 per cent) said they would rely on state accommodation or support by the time they retire, while 30 per cent feared they would have to continue working to pay their rent.

Adrian Boulding, Now: Pensions' director of policy, said 7.7 million people were expected to retire over the next ten years.

"Whilst it’s clear from our research that many UK homeowners remain optimistic that they can fill their income gap by trading down to a smaller house, they need to be cautious, as it’s a well-known fact that there is shortage of affordable and suitable homes that older people want to live in," he said. 

"We believe that workers should budget more than monthly minimum contributions into their workplace pensions savings, the earlier the better, to ensure they do not fall short of their own expectations when they come to retire in later life."

David Smith, the Newcastle-based director of financial planning at Tilney Bestinvest, said supply of smaller properties varied from region to region.

"In the North East there is an abundance of flats, so it's not something you can generalise across the UK," he said.

However, he said many retirees wanted to downsize to bungalows in preparation for physical deterioration. Such people were often surprised by how much more expensive bungalows were than flats, he said.

Mr Smith said he expected significant growth in equity release over the coming years as an alternative to downsizing - though he added he saw it as a "last resort".

Many in the industry are expecting an explosion in demand for equity release this year, as the first wave of interest-only mortgages reach maturity.

james.fernyhough@ft.com