The pension/property paradox: moving beyond tunnel vision in retirement planning report shows that pension pressures are set to rise as many people access their savings early while generous final salary pensions are expected to be extinct for most people by 2050.

Older homeowners are anticipating they’ll need an annual retirement income of £35,0721- a sum 16% higher than the average income of a full-time UK employee and more than double today’s average of £17,4202.

This ambitious expectation is leaving a potential shortfall of £17,652 a year.

Across the UK, the challenges of rising living costs (30%), prioritising mortgage repayments over pension savings (24%) supporting financial dependents (22%) and earning less money so unable to afford to save more (24%) are all cited as reasons why homeowners over-55 are unable to increase their pensions savings.

Not only are these factors impacting on pension contributions, but they are prompting the early erosion of savings pots, as one in six (16%) homeowners aged 55+ who are yet to retire have, or plan to, dip into their pension savings early.

This reality gap among homeowners aged 55+ comes at a time when pension income growth has stalled, increasing by just £7 a week over the last decade4, and savings pressures are escalating across the UK, which is already home to western Europe’s largest increase in pensioner poverty since 19865.

The report shows paying off a mortgage often competes with retirement savings to be older homeowners’ biggest financial priority – stifling pension contributions and increasing the likelihood of people being “asset-rich, cash-poor” in later life.

Just over one in three (31%) homeowners who have increased their pension savings in the last year have been able to do so as they’re no longer paying off their mortgage. Among those who still have a mortgage, almost half (44%) report that paying off their mortgage has, or is likely to, limit their pension savings potential.

Property wealth holds significant untapped potential to help close the retirement income gap. The average homeowner in England and Wales could access £88,290 from their property via a typical equity release plan – equivalent to over a decade of state pension payments.

Yet despite this appetite, bricks and mortar remain in the blind spot when it comes to retirement planning. Just one in five (19%) older homeowners who have sought information, guidance or advice on later life finances were prompted to consider accessing property wealth as an option – highlighting a disconnect between the choices they are presented with and the wealth or assets at their disposal.

David Burrowes, chairman of the Equity Release Council, said: “Our report emphasises the pension pressures faced by many across the UK and calls for property wealth to be better considered and integrated into the advice process. A single-product solution to retirement planning is no longer fit for purpose. We must break down the silos that create tunnel vision when it comes to later life financial planning.”

Will Hale, chief executive officer of Key, added: “Today’s report shines an interesting spotlight on an issue that the vast majority of us will face at some point in our lives. How do we juggle our financial responsibilities as we age in such a way that allows us to increase our pension contributions and achieve goals such as paying off our mortgages? Sadly, there is no simple answer to this particular question – especially with the slow death of final salary schemes but an increase in longevity.

“However, to me, this report suggests that we should be asking an entirely different question -how can we use all our assets to help us achieve our wants and needs in later life? While even the boost provided by using residential property, investment and savings as well as pensions might not help everyone achieve a retirement income of over £35,000 – which is higher than the average UK salary – it will certainly help.”