Millions face a pension shortfall – but your home may provide the solution

Looking beyond pensions to fund retirement income

A new report has warned that millions of people across the UK could be heading towards retirement with less money than they need. We look at how tapping into your property wealth may help to make up the shortfall.

The Pensions Commission estimates that around 15 million people are currently under-saving for retirement. Without action, it says that figure could rise to 19 million in the years ahead. The findings have renewed concerns about how people will fund their later years.

But while pensions remain the foundation of most retirement plans, they aren’t always the only source of wealth people have built up over their lifetime. For many homeowners, their property may be one of their most valuable assets – and could provide additional financial options if retirement income falls short of expectations.

Why are experts concerned about retirement savings?

The Pensions Commission report points to a number of challenges facing future retirees. Although automatic enrolment has helped millions of workers start saving into a workplace pension, the Commission believes many people still aren’t putting enough aside for later life.

In its interim report, the Commission warned that as many as 45% of working-age adults are not saving into a pension, and almost half of those not saving are in paid work.

It identified several groups that could be particularly affected, including:

• Women.
• Low and middle-income earners.
• Self-employed workers.
• Carers.
• Some disabled people.
• Many ethnic minority groups.

The self-employed are not automatically enrolled in a workplace pension, and as a result they are much less likely to be contributing to a scheme. The Commission also highlighted concerns that many people are accessing their pension savings at the earliest opportunity, potentially leaving themselves with less income later on.

How much income do you need in retirement?

One of the challenges with retirement planning is knowing how much income you’ll actually need. Recent figures from Pensions UK’s Retirement Living Standards suggest that the amount required can vary significantly depending on the lifestyle you want to enjoy.

The research estimates that a ‘Minimum’ retirement lifestyle requires around £13,900 a year for a single person and £22,500 for a couple. This is designed to cover the basics, along with some social activities and an annual UK holiday.

For those looking for a little more flexibility and financial freedom, a ‘Moderate’ retirement lifestyle is estimated to cost £32,700 a year for one person and £45,400 for a couple.

A ‘Comfortable’ retirement, which allows for more spending on leisure, travel and other discretionary costs, is estimated to require £45,400 a year for a single person and £62,700 for a couple.

Source: Pensions UK Retirement Living Standards. Figures show annual income after tax. They exclude housing costs.

The full New State Pension pays £12,547.60 a year, which does cover the majority of what’s needed for the ‘Minimum’ retirement income for many people. However, for those wanting more than the basics, extra income is needed.

A growing retirement challenge

These reports both come against a backdrop of an ageing population. According to the Pensions Commission, the proportion of people aged 65 and over is expected to increase from the current figure of 19%, rising to 28% by 2075. The number of people aged 75 and over is also projected to double between 2025 and 2075 – rising by more than 6million.

As a result, more people are likely to spend longer in retirement, increasing the importance of having enough income to support the lifestyle they want.

Could your home help support your retirement?

For many people approaching retirement, pension savings are only part of the picture.

Years of homeownership may have allowed you to build up substantial equity in your property. While that wealth is often tied up in the family home, some homeowners choose to access it to help support their retirement plans.

Property is increasingly being recognised as part of the wider retirement income picture. In polling conducted at a recent Society of Pension Professionals (SPP) event, nine out of ten  pension professionals said property has a role to play in supporting retirement income.

That doesn’t mean your home should replace pension savings. But, for some, that equity could create additional financial options in retirement, whether through downsizing, equity release, or a retirement interest-only mortgage.

Could downsizing be an option?

For some homeowners, moving to a smaller property, or a similar property in a cheaper area, may be the way to access some of the value tied up in their home.

Downsizing can release a lump sum that can be used to support retirement income, while potentially reducing ongoing household costs such as energy bills, maintenance and council tax.

Of course, moving home isn’t right for everyone. Many people have strong emotional ties to their property and community, which is one reason why some homeowners choose to explore alternatives such as equity release or a retirement interest-only mortgage.

Equity release as part of the retirement picture

Equity release allows eligible homeowners aged 55 and over to access some of the value tied up in their property. The most common type is a lifetime mortgage, which allows you to borrow against your home’s value while continuing to live there. 

You don’t have to make any monthly repayments on the money you borrow, though this is an option if you wish. Instead, the loan and accrued interest are typically repaid through the sales of your home when you pass away or move into long-term care.

Among the popular reasons people use equity release are to:

• Supplement their retirement income.
• Make home and garden improvements.
• Pay off their existing mortgage.
• Clear existing loans and credit cards.
• Cover unexpected expenses.
• Help children or other loved ones financially.
• Book a special holiday.

Modern lifetime mortgages offer flexible features, such as the option to make voluntary repayments or take money in stages rather than as a single lump sum. Options like these can reduce the overall cost of the loan, protecting more of your home’s value to pass on to loved ones.

As with any financial product, it’s important to consider the advantages and disadvantages and seek advice before making a decision.

What is a retirement interest-only mortgage?

A retirement interest-only (RIO) mortgage is another option that some homeowners who are in or approaching retirement might explore.

With a RIO mortgage, you make monthly interest payments for the life of the plan, which means the amount you’ve borrowed does not increase over time. The loan itself is normally repaid when the property is sold after death or a move into long-term care.

For retirees with enough income to comfortably afford the payments, a RIO mortgage can provide another way to unlock property wealth. 

Other ways to tackle a retirement income gap

Property wealth is just one potential solution. Depending on your circumstances, other options could include:

• Increasing pension contributions: If you’re still working, paying more into your pension now could make a meaningful difference later.
• Building additional savings: Savings and investments outside a pension can provide extra flexibility in retirement.
• Working for longer: Some people choose to delay retirement or work part-time for longer to boost their income.

Looking at the bigger picture

The Pensions Commission’s warning about the retirement savings shortfall is a reminder that retirement planning isn’t something to put off until the last minute. But while workplace pensions and the State Pension remain vital, many people may need to look at all their other assets to build the retirement they want.

For homeowners, property wealth could form part of that plan alongside pensions, savings and investments. Whether that’s through downsizing, equity release, a retirement interest-only mortgage or simply keeping those options in reserve, understanding the choices available could help provide greater financial flexibility in later life.

Sources

Around 15 million people are currently under-saving for retirement: Britain is undersaving for retirement warns Pensions Commission. Gov.uk. Accessed 03 June 2026.

A minimum retirement lifestyle requires around £13,900 a year for a single person: Retirement Living Standards. Pension UK. Accessed 03 June 2026.

The number of people aged 75 and over is also projected to double between 2025 and 2075: Pensions 2050 Evidence and Future Priorities. Pension Commission. Accessed 03 June 2026.