Baby boomers 'rely on homes for pension'

More than half of people approaching retirement are relying on their homes to supplement their pension, according to a survey of more than 2,500 households.

More than half of people approaching retirement are relying on their homes to supplement their pension, according to a survey of more than 2,500 households.

Only 46 per cent of homeowners aged between 45 and 54 - the post-war "baby boom" generation - plan to their leave their current home debt-free in their will, according to a poll commissioned by the mortgage industry. Even those who have succeeded in paying off their mortgage intend to take on their debts, with almost half aged 45 to 54 saying they will cash in on the value of their home to supplement their pension.

Experts said the survey showed how vulnerable older generations - who have already been hit by the pension crisis - would be to a house prices slump.

The findings of the survey, carried out for the Council of Mortgage Lenders, will add to fears that a fall in house prices could derail the economy as homeowners cut their spending in a bid to fill the shortfall.

The survey of 2,700 people by the market research firm BMRB found that only the elderly were still intent on leaving an unencumbered property to their heirs. The younger the homeowners, the more likely they were to be happy to cash in on their home to fund their retirement.

"Younger homeowners are more likely to be pragmatic and say that they would like to leave an inheritance only if they need not need it themselves," Jackie Smith, senior research analyst at the CML, said.

"This does suggest a changing attitude to both leaving inheritance and accessing the equity in property. Post-war homebuyers were the first generation to have become mass homeowners and are reluctant to use equity."

Most of those planning to fund their retirement this way said they would trade down to a smaller property, although a sizeable minority plan to take out a new mortgage.

The survey provides further evidence of rising concern among households that they will not be able to live off their pension in retirement.

A majority said they planned to work after retirement, of whom a quarter said this was simply to make ends meet.

The survey will also ring alarm bells with economists, who believe the pension crisis explains why homeowners have tended to use the recent surge in house prices for saving rather than just spending.

Malcolm Barr, UK economist at JP Morgan, said a drop in house prices could intensify the impact on the economy from the pensions crisis. "If the gains in housing wealth made over recent years looked likely to dissipate, those relatively near to retirement could be induced to raise their savings to make up for smaller prospective gains on the sale of their homes," he said.

The survey found the children of southern homeowners were the least likely to receive a debt-free property in their inheritance, with those in the North most likely. "This will partly be a reflection of higher property values in the South, giving southern owners a greater ability to release housing equity while still leaving significant inheritances," Ms Smith said.