Fool.co.uk Press Releases
15 February 2012

Less Than Half The Nation’s Homeowners Have Savings and Investments In Preparation For Retirement

The Motley Fool reveals why people can’t afford to retire

  • One in five (22%) UK homeowners plan to use their home as their pension pot
  • Four out of ten (40%) homeowners have sufficient savings and investments other than their home in place for retirement
  • One in four (24%) homeowners don’t have any retirement plans
  • Six out of 10 (62%) homeowners do not invest in shares

New research* from the popular online financial community The Motley Fool at Fool.co.uk, reveals that only four out of ten (40%) UK homeowners say they will have sufficient savings and investments other than their home when they retire.

A further one in five homeowners (22%) plan to downsize their family home when they need to release equity, and one in four (24%) don’t have any plans in place for retirement at all.

Investing too late

On average UK homeowners are sitting on cash of around £14,000**. The amount of cash we hold remains largely unchanged whether we are 25 or 44. It is not until we are over 55 years of age that our cash holding increases, but only then by a third to an average of £18,750.

Worryingly, more than six out of ten UK homeowners (62%) do not own shares even though they may have available cash. People aged between 25 and 44 are some of the least likely to own shares. Nearly three quarters (73%) of 35-to-44 year olds do not own shares.

It seems that it is not until we are over 55 years of age that we become somewhat interested in share investing with almost half (47%) of this age group claiming to have share investments.

Welsh homeowners least prepared for retirement

Across the nation, there are no noticeable divides in retirement planning. Both the north and south show similar reliance on the wealth accumulated in their properties. Around one in five homeowners (22%) will rely on the equity in their homes and two in five (40%) say they will have enough savings elsewhere. There is one notable regional exception, though. Only one in four (25%) Welsh homeowners say they will have sufficient savings and investments other than their home and, shockingly, over one in three (36%) don’t know what they will do when they need to retire.

Women are more reliant on their homes

The disparity between male and female homeowners’ plans for retirement is significant. One in two (51%) male homeowners will not be relying on their property and say they have sufficient saving and investments to fund their retirement in contrast to only almost one in three (30%) women. Furthermore for one in four women (27%), unlocking the funds in their homes is the best option compared to one in six men (17%).

Interestingly, seven out of ten women homeowners (70%) do not invest in shares compared with 11 out of 20 men (56%) who don’t.

David Kuo, Director at The Motley Fool comments, “It is understandable for people to want to put great store in bricks and mortar because property prices have almost been a one-way bet for about as long as any of us can remember.

However, it is important to appreciate that housing wealth is not real wealth. Of course, you can turn your home into cash by selling it. But if a significant proportion of people wished to sell at the same time, prices would collapse.

The more your wealth is stored in your home, the more reliant you become on property wealth for your retirement. That is why it is important to spread your wealth across different asset classes when you are young and continually adjust your allocation over time. Reducing risk as you get older will put you in a more comfortable position when it’s time for your pipe and slippers later on.

The story could be so different for so many Britons if only they start to invest early. Sitting on cash deposits of £14,000 throughout your life may seem like a safe thing to do with your money. But investing it when you are in your thirties could swell the pot to over £200,000*** when you retire. That seems like a better plan than figuring out how to extract value from your home later on in life.

Dr Ros Altmann, Director General at Saga adds, “It is certainly worrying that so many people have not prepared adequately for later life. In the last few years, our savings ethic seems to have been destroyed - partly due to Government policy.

“QE is damaging people's pensions, rock bottom interest rates make savings worth less each year as inflation stays high and people have not even started to save for possible later life care needs.

“The reality is that, if people have not saved enough for retirement, they will have few choices for a decent lifestyle. If they want more than their state and private pensions can give them, they will either have to work longer, save much more now, sell their home or borrow against it to bring in more money - or they will be pretty poor.”

-ENDS-

For further information and/or to arrange an interview with David Kuo, please contact: Sonia Rehill on 020 7462 4308 or soniar@fool.co.uk

A supporting infographic is available at UK Homeowners Retirement Planning

Notes to Editors:

* All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,052 adults. The number of homeowners who completed the survey was 1,362. Fieldwork was undertaken between 3rd and 6th February 2012. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

** Respondents were asked to specify their total net worth excluding any debts and mortgages, and the percentage of total net worth made up of cash, shares, home, buy to let property and other assets. Median figures have been calculated for those who specified a net worth of more than 0 and were able to estimate proportions made up by each asset.

***Credit Suisse Global Investment Returns Yearbook 2012 (Feb 2012)

About The Motley Fool (UK)

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