Britain suffers from financial myopia

Debt ridden Brits are relying on their property to help them cope financially with retirement, suggests a survey from Prudential.

More than half those over-50 are in debt, compared to 68% of the population as a whole.

Despite the problems being in debt can cause, just 12% of those over-50 are worried or really concerned about it.

Attitudes towards debt are as bad with people of retirement age. Of the over-60s, 45% are still in debt, yet just 9% are worried about it.

Prudential believes the problem is that the nation as a whole suffers from a lack of careful financial planning. Only 20% of the population as a whole is confident that their current level of savings will cover them in retirement.

They plan to top up their pension using a mixture of different assets. The most popular plan to boost retirement income is to draw on property (48%). The state pension is another way (28%), as is inheritance (26%).

This is all very well, if peoples assumptions about the value of these assets prove to be correct. But this may not be the case. Again, referring to over-50s, 17% of over-50s think that house prices will go up by at least 50% by the time they retire, and 9% think they will at least quadruple.

Prudential warns that over-50s in particular need to plan extremely carefully given their proximity to retirement, so making overly-optimistic assumptions about the value of property in the future, could mean that they are left with a shortfall in retirement.

Ali Crossley, director for lifetime mortgages at Prudential UK, says: “Clearly its crucial for all age groups to consider long term solutions to pensions provision.

“The younger ones still have enough time to stop borrowing and start saving and even people approaching retirement will be able to improve their position by saving more.

“However, in some cases, where additional saving is not enough to plug the shortfall, these people will need to look at other ways of supplementing their income.

“The good news is that there are options. Prus figures show that nearly half of the population is relying on property to help fund their pension. Releasing the equity in your property is just one way of enabling this.

“We have just launched a new lifetime mortgage at Prudential called the Property Value Release Plan.

“This product is different to some lifetime mortgages because it allows people to draw down money as and when they need it rather than taking a large amount up front. Interest is only charged on what customers have taken, so the Prus lifetime mortgage can prove much cheaper.”