- Retirees are increasingly relying on their home to help fund their retirement
- Most common way of raising capital is downsizing, but this comes at significant cost
- LV= says waiving or discounting stamp duty would be fairer on these ‘Property Pensioners’ and help free up much needed family homes
LV= has found a third (34%) of people approaching retirement are set to be ‘Property Pensioners’, relying on the money tied up in their home to live off in retirement. This is a significant increase compared to the 22% of existing retirees who have done the same.
Downsizing is the most popular way to raise money from a property [1], but this comes with significant costs, with the average house price triggering a £4,600 stamp duty bill [2].
With people living longer in retirement than ever before, LV= believes it is unfair that pensioners are being indirectly penalised for accessing the money in their home to help provide an income. Four in ten (42%) of those nearing retirement say they’d be more likely to downsize if a tax cut were introduced, so scrapping stamp duty will help ensure retirees who want, or need, to downsize for retirement planning can do so without financial penalty.
This reform could also help millions of younger homebuyers [3] find a family home by allowing ‘empty nesters’ to move and increasing the supply of larger homes. LV= found three-quarters (77%) of pensioners live alone or as a couple, yet two-thirds (64%) live in properties with at least three bedrooms, so may have far more space than they need.
John Perks, Managing Director of LV= Retirement Solutions, said: “More and more of us are relying on our home to help fund our retirement, yet retirees face significant costs if they choose to downsize.
“We’re calling for Government to scrap the unfairly high stamp duty costs for downsizing pensioners and provide a much-needed injection of larger homes into the market for the millions of families struggling to move up the ladder. By increasing the number of property sales, this could also increase Government’s stamp duty revenues in the long run, making it a win-win for everyone.”
The research is part of LV=’s annual State of Retirement study, which outlines the typical financial situations for retirees, before and at retirement age. The first chapter looks specifically at ‘Property Pensioners’, who rely on some income from their property when they retire, whether that is through downsizing, equity release, moving to a less expensive area or renting out a room. The full report will be released in the summer.
Notes to Editors
[1] 19% of all retirees have or plan to downsize, compared to 6% who would use equity release, 5% who would move to a less expensive area, 4% who would sell their property altogether and 1% who would bring in a lodger.
[2] According to the Office of National Statistics’ House Price Index (Jan 2016), the average cost of a house in the UK is £292,000. Based on current stamp duty rates, 2% tax would be payable on £125,000 (between £125,000 and £250,000) and a further 5% would be payable on the remaining £42,000. Therefore, £2,500 + £2,100 = £4,600.
[3] According to research by LV=, 5.7 million homeowners have considered moving house in the last five years but have decided against it because of the costs involved (46% of people aged between 18 and 34 said they are struggling to find an affordable family home).
The State of Retirement research was conducted by Opinium Research 11-14 March 2016. The total sample size was 1,500 UK over 50s, 1,200 of whom own their own home. An additional question, to establish the availability of family homes, was asked of 2,001 UK adults over the age of 18. The research was conducted online and results have been weighted to a nationally representative criteria.
LV= offers two Lifetime Mortgages which allow customers access to equity tied up in their properties. The Flexible Lifetime Mortgage allows customers to drawdown funds as required. The Lump Sum+ product allows consumers to take a one-off loan at competitive interest rates which are dependent on how much they want to borrow.