Over 7.5 million people, or one-in-eight of the UK population are relying on their home to fund their retirement, even though more than 1.5 million will not clear their mortgage until they are 65.
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The demise of final salary schemes and the reported £27 billion savings gap means people buying now will be asset rich but, by the time they retire, will be cash poor. The result of first-time buyers investing huge amounts into deposits or taking out long-term fixed rates means investing in private pension schemes is becoming an afterthought, and the ‘living for the now’ generation is looking at equity release to fund their retirement.
A main problem is that, as people live longer and obviously require more financial capital to support themselves as they are older, there is an increasing movement towards long-term care and if the only asset is in property this may cause problems.
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Phil Perry, director at ARK Financial Planning, said: “It can be difficult building up other savings while paying off your mortgage and also investing in a pension. But it is potentially risky to believe your home will provide for your retirement if your pension is not sufficient.
“It therefore makes sense to build up savings while you are working and strike a balance between this and clearing your mortgage. With a bit of luck you will be a long time retired so it makes sense to plan.”
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