Sunday, 16 October 2011


The millions of homeowners who are planning to downsize over the next five years to help fund their retirement may face more problems than expected.

Statistics gathered by Investec Wealth & Investment reveal that the average downsizer generates approximately £98,000, whereas the average owner expects to make £120,000. Only 14% of those who have downsized came in under budget, while around 40% have spent more than anticipated on their new property.

The drop in property prices in recent times has meant that, on average, only £43.50 per week of retirement money has come from downsizing, making £2,262 each year, research by Standard Life has shown. Retirees who expect to sell their home, buy a much cheaper property and live off the difference, are often surprised by the obstacles that stand in their way. In a nervous buyers market, selling prices may be much less than hoped for. Financial pressures can significantly reduce the amount that can be made with a sale.

The cost of moving home is also a factor to consider. Between estate agency fees, removals, stamp duty and conveyancy charges, significant costs can swallow money that’s been set aside for a retirement fund.

The unstable economy has also seen many UK residents selling their houses and relocating to countries where houses are less expensive, a strategy that has garnered unexpected losses in light of the collapse of the Pound against the Euro. As a result, many retirees realise that their ideal retirement lifestyle is unattainable.

However, potential solutions include an equity release scheme or renting, which would mean a larger lump sum and greater income, but would have to be balanced against the cost of renting and the potential of increased costs over time. Overall, downsizing can be risky in the current climate without other savings to fall back on.

Downsizing can be the wrong move for a happy retirement -