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Fall in house prices hits pension pots

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Falling house prices have wiped off £29bn from British pension pots this year, yet almost 8 per cent of the UK population are relying on their property to fund their retirement, according to a new research from Baring Asset Management.

The research revealed that of the 2.8m people relying on property to fund their pensions, around a quarter are aged between 55 and 64, and a further 7 per cent are aged 65 or over, leaving them little or no time to build up extra, less risky, capital to help fund their retirement.

The research further revealed that those in East Midlands (11%) are more like to rely on homes to fund retirement while Londoners are the least likely to take this approach (5%).

“During the long house price boom it was convenient to view your home or other property as your pension pot but recent events have exposed the risk of this approach. Sadly, those approaching or at retirement age have little or no time to rebuild their savings and are paying the price,” said Marino Valensise, chief investment officer at Barings.

“What’s really alarming is that so many people have not changed their retirement plans despite what’s happened to house prices. Saving for retirement should start as early as possible and involve a well planned approach that controls risk through spreading investments across several asset classes.”

In spite of the financial crisis and house price falls, nearly 7.9m of those relying on property to fund part of all of their retirement have made no changes to their pension in the past year. Only 433,000 have started to make alternative pension arrangements and are looking at other investment opportunities.

“Apart from the tax efficient benefits of a pension plan, putting all your retirement eggs in the property basket is hopelessly optimistic,” added Valensise.

Published in the Financial Times

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Written by Magda M Ali

December 17, 2009 at 8:57 pm

Posted in Published pieces

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