As many as one in three UK workers with defined contribution pension schemes are relying on the house they live in to form an important part of their retirement income, research reveals.
Yet, while a minority of people will be able to downsize their properties and use the extra capital to buy a substantial annuity, selling a home to fund retirement will not be a viable solution for most, the Mercer Human Resource Consulting study warns.
Deborah Cooper, principal at Mercer, said: “For most defined contribution scheme members, selling a home to buy an annuity will provide little income, if any at all, once rental or re-purchasing costs have been taken into account.
“If people fail to save enough now and rely on selling their homes to provide an income, they could be in for a nasty shock at retirement.”
According to the survey, 55% of respondents think a company pension scheme is the best way to save for retirement although only 41% think their employer is doing enough to help them prepare financially for retirement.
“Companies are well placed to help employees understand how much they need to save for retirement, and how to maximise their savings,” Cooper said. “A lot of people tend to doze off when the subject turns to pensions, but they could have a rude awakening when they reach retirement.”