Downsizing in retirement

Downsizing in retirement

With property prices continuing to make headlines, many people nearing retirement are contemplating the financial advantages of downsizing to a smaller property.

Moving somewhere smaller can slash household running costs such as heating bills and council tax. And if you end up with spare cash you can invest tax efficiently to augment your retirement income. With the annual allowance for tax year 2014-2015 standing at £15,000, a New Individual Savings Allowance (NISA) could be a great place to deposit a lump sum or make regular payments of smaller amounts and get tax benefits.

You could otherwise use the cash you’ve released to help family members buy a place of their own by helping with their deposit, or invest in a property for them to live in that you jointly own. (You would need advice on the Capital Gains Tax and Inheritance Tax implications)

A step too far?
Moving house later in life can be too much of a wrench, but there is an alternative way of raising cash against the value of your property which means you could continue to live in it and avoid moving. Equity release allows you to benefit from the ‘equity’ or value tied up in your home, in the form of a loan. (As releasing equity from your home might result in your relatives inheriting less than they anticipated, it makes good sense to discuss the implications with your family and financial adviser)

Downsizing should not be a substitute for proper retirement planning; it would be dangerous to assume that property prices will continue to rise for years to come.

This is a lifetime mortgage. To understand the features and risk ask for a personalised illustration.