New Research Shows Generations Aged 27-Plus Favoring Homes Over Pensions for Retirement Wealth, Despite Limited Mortgage Ownership

New Research Shows Generations Aged 27-Plus Favoring Homes Over Pensions for Retirement Wealth, Despite Limited Mortgage Ownership

Generational Shift Revealed: More Young Adults Prefer Property Over Pensions for Retirement Income

New research from Standard Life has uncovered a generational shift in attitudes toward retirement planning, with individuals aged 27 and above expressing a preference for using property as their primary source of wealth in old age rather than relying on pensions.

The survey, which included responses from over 6,000 participants, indicates a potential risk in relying solely on property for retirement income.

Realistic Expectations Questioned: Young Adults May Overlook Challenges in the Housing and Mortgage Market

Despite the fact that only one in ten people aged 27 or under currently has a mortgage, the survey reveals that many young adults believe they will use their homes as a significant source of retirement income.

Standard Life cautions that these expectations might not align with the realities of today’s housing and mortgage market.

The survey found that one in five individuals in this age group anticipates still paying off a mortgage during retirement.

Insight from Standard Life: Balancing Property and Pensions Essential for Retirement Income

Standard Life acknowledges the merits of both property and pensions as sources of retirement income.

Dean Butler, Managing Director for Retail Direct at Standard Life, emphasizes the importance of not relying on a single asset for retirement and suggests building a diversified portfolio that includes various funding options.

The survey highlights that those closest to retirement age show a preference for pensions as their main source of retirement income.

Advantages of Pensions: Tax Relief, Employer Contributions, and Investment Growth

Pensions offer advantages such as tax relief on contributions, free employer contributions, and the potential for investment growth.

However, private pension savings are currently inaccessible until age 55, a threshold set to

increase to 57 in 2028.

Individuals with defined contribution pensions must carefully assess how long their pension needs to last and how much they can withdraw each month, unless they opt for an annuity providing a guaranteed income for life.

Property as a Retirement Asset: Considerations and Challenges

Using property as a source of retirement income presents its own set of considerations. While individuals can sell their property before the minimum pension age, most people view their homes as primary residences.

Accessing funds tied to the property may require downsizing, moving to a more affordable area, or considering equity release.

Standard Life suggests seeking financial advice, particularly regarding equity release, which can be valuable for those without other assets.

Financial Expert’s Perspective: The Importance of Balancing Property and Pensions

Financial experts emphasize the need to find a balance between property and pensions for retirement planning.

Rob Burgeman, Investment Manager at RBC Brewin Dolphin, underscores the benefits of pension tax relief, efficient taxation, and the power of compound returns over an extended period.

While recognizing the importance of having a place to live, Burgeman stresses that retirement requires both a source of pension income and a place to reside.

Achieving this balance allows for long-term financial security and more choices in retirement.

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