As you approach retirement, you may find yourself concerned that your pensions and savings won’t provide the income needed to support your desired lifestyle.
It seems many in the UK are feeling this way, with Corporate Adviser reporting that around 9 million people aged 25 to 54 aren’t on track for an adequate retirement. This includes around 5 million aged between 40 and 54.
If you are worried about a potential shortfall, you might be looking at other sources of wealth. And, as a homeowner, one of the largest assets you hold could be your property.
FTAdviser found that owner-occupiers over the age of 60 hold 55% of the UK’s housing wealth. In total, older homeowners hold £3.84 trillion of housing equity, including:
- £2.92 trillion in main residences
- £0.62 trillion in buy-to-let property
- £0.29 trillion in other residential holdings.
As a result, unlocking some of this property wealth could help support your retirement income, fund home improvements, or support loved ones.
There are several ways to do this, including equity release and downsizing.
Read on to learn how these options work and some of the benefits and downsides to consider before you make a decision.
Equity release could allow you to access property wealth without moving
Simply put, equity release allows you to unlock some of the wealth tied up in your home while you continue to live there.
One of the most common forms of equity release is a “lifetime mortgage” – a loan secured against your home. You will then typically receive a tax-free lump sum, regular payments, or a combination of both.
It’s important to note that you may not have to make monthly repayments unless you choose to do so. Instead, the loan and interest are normally repaid when you pass away or move into long-term care and the property is sold.
Equity release has become more popular in recent years, with the Equity Release Council reporting that the market grew by 11% in 2025 and lending rose from £2.3 billion in 2024 to £2.57 billion.
Perhaps the most apparent benefit of equity release is that it allows you to remain in your home.
This may be vital if you’re emotionally attached to the property, wish to stay near loved ones, or simply don’t want the disruption of moving.
Moreover, the money you release from your home is typically tax-free, and you may choose to use it to improve your retirement lifestyle, support your family, or adapt your home if your health deteriorates later in life.
And, if you choose a lifetime mortgage, you may be able to benefit from a “no negative equity guarantee”.
This means you’ll never owe more than your home’s overall value, provided you meet your provider’s terms.
It’s vital to remember that interest on equity release can accumulate over time, meaning the amount you owe can grow significantly. This might mean you can’t leave as much of your hard-earned wealth for your beneficiaries.
Additionally, equity release can affect your entitlement to means-tested benefits, such as Pension Credit or Council Tax reductions. You may also find you’re restricted in what you can do to the property, such as renting it out.
As such, while equity release can be useful, it isn’t always right for everyone, so you should think carefully about whether it would realistically support your retirement plans.
Downsizing could free up your wealth and reduce ongoing costs
One of the main reasons you may decide to downsize is to access some of the wealth tied up in your property.
If you’ve owned a home for a long time, it may have increased significantly in value since you first bought it.
So, selling your current home and moving to a smaller or less expensive one could allow you to access some of this growth.
You could then use the released funds to supplement your retirement income, support loved ones, or even build a financial safety net for unexpected costs.
This could offer some additional peace of mind if you’re concerned that your pensions or investments may not provide the income you need throughout retirement.
It may also reduce the amount you need to withdraw from other assets, potentially helping your savings last longer.
Moving to a smaller home can also make your day-to-day expenses easier to manage, as you may reduce monthly bills and spend less on upkeep.
You may even find a home better suited to retirement. For instance, you could choose a property that is easier to maintain, has fewer stairs, or is closer to essential shops.
Of course, downsizing does come with potential drawbacks.
You might not be able to find a suitable home in the area you want to live in, or it may be much more expensive than you initially expected, limiting the financial benefits of moving to a smaller property.
There are also moving costs that you may overlook, namely estate agent and solicitor fees, surveys, and Stamp Duty Land Tax.
These can quickly reduce the amount of wealth you actually release from your home.
Downsizing isn’t just a financial decision, either. If you’ve lived in a home for many years, you might have strong emotional ties to it.
As such, it’s vital to consider both the financial and emotional impact before you decide to move to a smaller home.
Financial planning could help you fund retirement without necessarily releasing property wealth
Both equity release and downsizing can be useful options, but they aren’t necessarily a default solution to a retirement shortfall.
Thankfully, financial planning can help you learn about and explore various other options.
For instance, we could review all the assets you currently hold to understand how much income you could generate when you stop working.
We can also use cashflow planning to show how long your wealth would last and how various external scenarios might affect your income.
If we find that you are likely to have a shortfall, we can discuss options for building additional wealth, such as increasing your pension contributions or saving and investing elsewhere.
This could help you decide whether you need to release property wealth at all, or if there are other ways to fund your dream retirement lifestyle.
Get in touch
We can help you assess your retirement income needs and decide whether equity release, downsizing, or another strategy may be suitable for you.
Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, we can assure you that we’re a bona fide company providing excellent advice and high-quality service.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate estate planning, tax planning, or cashflow planning.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.