Should your home be your pension?

Almost a fifth of those who use property to generate income do so for their retirement1. But is this a good strategy?

For many of us, our houses are our most valuable asset and we may plan to use them to fund our retirement. But is this a good strategy? Here are some of the pros and cons.

The pros of property as pension

  1. It may have earned more than you have

Over the past two decades, many UK properties have outearned their owners. According to the latest Land Registry figures, the semi-detached house in London bought in 1995 for the average price of £97,000 would have been be worth nearly £580,000 in September 2019, an average rise of £20,100pa2.

  1. You may want to downsize

Many people want a smaller home as they get older. This also gives you the chance to release a tax-free sum of money for retirement because there is no capital gains tax to pay when you sell your main residence.

  1. You can stay put

If you don’t want to leave your home, equity-release schemes can allow you to release capital but still live in your property, and in some cases can be structured so you can still leave an inheritance to your family.

The cons of property as pension

  1. You lose out on tax advantages

Saving into a pension lets you claim back tax you have paid on income, an option not available with your property. And you can take a 25pc lump sum tax-free from your pension. Relying on your home means you don’t get the benefits of either proposition.

  1. Calculate the true cost of moving

Equity release is more expensive than a mortgage. And even though lifetime mortgage rates are coming down, this is still a relatively expensive form of finance.

  1. Buy-to-let advantages are declining

New government rules on stamp duty and tax relief on mortgage interest make this less viable.




A hybrid approach is likely to be most efficient. A qualified financial adviser will be able to speak to you about which assets to use first to fund retirement efficiently.

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

Tax treatment varies according to individual circumstances and is subject to change.

To find out more about how we can help you achieve your financial goals, call 01732 617950

It is important to take professional advice before making any decision relating to your personal finances. Information within this page is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.

Tax and Estate planning are not regulated by the Financial Conduct Authority

The value of pensions and investments can fall as well as rise. You may get back less than you invested.

Will writing is not regulated by the Financial Conduct Authority. 

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