Research by Fairer Finance found that using housing wealth in retirement could add £21bn a year to the UK economy by 2040.
The study, commissioned by the Equity Release Council, predicted that over half (51%) of UK households would need to use their property wealth to cover living costs in later life, releasing more than £23bn each year at today’s prices.
The report found that nearly four in ten (38%) future retirees are set to have incomes below the minimum recommended standard if they rely on pensions and savings alone.
The report also revealed that average housing wealth in the UK is higher than average pension wealth, exposing a gap in retirement funding.
Fairer Finance has called for urgent action from both the Government and the Financial Conduct Authority (FCA).
The recommendations included building more homes suitable for downsizing, reducing Stamp Duty for downsizers, making housing wealth a normal part of retirement planning, creating a single financial view for pensions and property, and reforming how financial advice covers later life.
On financial advice, the report said the FCA should ensure equity release advisers consider all types of later life lending, make sure advice on mortgages for people over 50 includes retirement planning, allow targeted support for people thinking about using housing wealth, and use Consumer Duty to promote a fair and competitive market.
James Daley, managing director at Fairer Finance, said: “It’s an inevitability that more people will need to rely on their housing wealth in retirement – and our new research shows the scale of the problem as well as the opportunity.
“The combination of smaller pensions, increased longevity and rising care costs threaten to create a perfect storm which will leave millions of people unable to maintain their living standards in later life.
“But with around 75% of the population owning a property as they reach retirement, many people are sitting on – and sleeping in – a significant store of wealth.”
Daley added: “As things stand, there are a number of social, economic and regulatory barriers which stop housing being part of the mainstream retirement planning conversation.
“For those who want to downsize, there is a lack of suitable and desirable retirement housing.
“While when it comes to borrowing in later life, the silos in regulated advice markets mean many people are not being presented with all their options.”
He said: “If we’re to head off a later life funding crisis, policymakers need to start taking action to bring down these barriers now.”
The report also found that around £23bn of housing wealth could be accessed each year, about 0.5% of total housing wealth for those aged 60 and over.
This could account for 0.7% of total UK GDP in 2040.
Additionally, according to the report around 51% of households might use housing wealth to boost their living standards in later life.
In 2040, 18% of households aged 60 plus could be tapping into their property wealth.
The median total amount accessed per household was estimated at £140,000.
Jim Boyd, chief executive at Equity Release Council, said: “Fairer Finance forecasts property wealth taken in the form of later life lending could inject £21 billion into our economy each year from 2040.
“This substantial amount has the potential to act as a real economic stimulus supporting businesses and improving the living standards and spending power of our rapidly ageing population.
“45,000 UK jobs are already directly funded through money released from bricks and mortar – the growth of later life lending can potentially take this to another level.”
Boyd added: “Whether an older person speaks to an equity release adviser, a mortgage adviser or a financial adviser, how they want or need to use their housing equity should be part of the conversation.
“Today’s report challenges us to develop a system that treats housing wealth as a core part of retirement planning, removes regulatory barriers and gives people the confidence to use it wisely.”
