Selling your home and moving somewhere smaller might not solve a pension problem
Thursday 06 Jun 2019 Author: Laura Suter

Lots of people who haven’t saved enough in their pension pots say they will rely on downsizing their home to release more money – but how realistic is this?

People rely on rising house prices to help fund part of their retirement, and many people have included downsizing in retirement in their pension financial plans. By moving to a smaller, cheaper property many people think they can release a lump sum of cash to help bolster their savings.

A quarter of people who downsized their home ended up with less money than they thought they would, according to research from finance firm OneFamily – as legal, moving and renovation fees swallowed up more money than many downsizers had predicted.

This is particularly problematic when you consider that one in five said they had no choice but to downsize to release money for their retirement income.


So what are the costs? The average person questioned by OneFamily said they ended up with £105,900 from the sale of their property, but this was almost £29,000 less than they anticipated. If you’re moving you need to factor in estate agent costs (which are typically between 1% and 1.5% of the value of the property), legal fees and stamp duty.

But other costs get missed off the list, including removal costs, the cost of redecorating your new pad or giving your current home a lick of paint to sell it, and the fees involved in buying any new furniture for your new house.

Another reason for the shortfall in money received is that people have unrealistic expectations of what their home will sell for, and of what they can buy their next property for.

This is another factor that can hamper downsizers – there is a lack of stock in some areas of the kind of property they want to move into. Research by Central Bedfordshire Council, for example, found that 61% of people want to move into a bungalow when they downsize. This makes sense as it avoids having to navigate stairs and the properties are often purpose built for older people.

However, there isn’t enough supply to meet the demand in many areas. Developers point out that in London and the South East, where land prices are at a premium, they need to make more use of the footprint of the property – meaning they are more likely to build a large family home or a block of flats.

People often point to the mass rise in house prices over the long period they have owned their property – highlighting this as the reason they can take a sizeable chunk of money out of their home.

But if you’re staying in the same area, the places you’re buying will also have risen in price, which will suck up some of your gains. Do you research on what you can actually afford to buy, and work out if it leaves you with enough of a lump sum at the end.

Considering downsizing?Go through this checklist first:

Work out accurate costs: 

Get quotes from solicitors, removal companies and estate agents.

But also consider if you need to do any work to your place before selling, and the cost of that, or do you need to de-clutter and pay for storage to make the house more attractive to buyers.

Push down these costs as much as practicable, every pound you pay out in fees is less money in your back pocket after the move.

Be realistic on what you can sell for: 

There are loads of tools online that you can use to work out how much your house is worth. But look at the recently sold prices, via Zoopla or Land Registry data, rather than a property’s listing price.

Be as objective as possible on the flaws with your home and whether it’s comparable to others that have recently sold. Estate agents will also value the property for free, but remember they are also trying to get your business.

Is there anywhere you want to buy?

Before you put your property up for sale make sure that there’s actually properties out there that you’d be willing to buy.

It can be tricky to find a home that’s smaller than your current one without feeling pokey.

Also, think about future-proofing so you don’t have to incur the costs of moving again – do you want to be nearer a town for when you can no longer drive, is the garden manageable, is it close to a station for visiting relatives?

Work out the stamp duty you’ll pay:

Stamp duty has become one of the big barriers for people with sizeable property wealth moving. It can add considerably to your housing costs. Buying a £500,000 home will set you back £15,000, for example, while an £800,000 home will cost you £30,000 in stamp duty. There’s no getting away from these fees, so you need to factor them in.

Be realistic on timeframes: 

The property market is sluggish at the moment, so it’s taking many sellers longer to offload their home than they expected. The OneFamily research found that on average it took seven months from people listing their property to moving, but that’s the average and it might well take longer. Don’t leave it until the last minute, when you absolutely have to move or you may end up compromising more on price.

Have you discussed your move with your family and children?

Aside from the financial side of leaving the home you may have lived in for decades, there’s an emotional side too. Speak to your children about your plans, get their help with moving, work out whether it’s more sensible to move closer to family – have all these discussions as early as possible.

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