Pensions are typically seen as the main way to generate an income when you stop working, you could also use buy-to-let properties, ISAs or investments to subsidise your retirement lifestyle.
Another popular choice is downsizing from a larger property to a smaller one, as this can release significant amounts of equity that could then be used to fund your retirement. While this may sound like a shrewd financial strategy, care should be taken. Read on to discover why.
Your home could be a savvy long-term investment
Like investments, property has the potential to provide attractive long-term gains. Over the years the average price of property has risen substantially, providing millions of UK homeowners with large amounts of equity in their home.
This is highlighted by figures from the Land Registry, which reveals that in June 2004 the average UK house price was £144,410. By June 2025, it had skyrocketed to £268,652. With this in mind, it’s hardly surprising that many homeowners are now looking to use the growth in their property’s value to help fund their retirement.
Downsizing your home may not release enough equity
While downsizing could release a large amount of equity from your home, it’s important to understand whether the lump sum that's released is going to be enough to provide you with the retirement you want. This is because the difference between your home and the type of property you would want to downsize into may not be enough to fund your retirement lifestyle over the long term.
To demonstrate this, you might want to consider figures released by Pensions UK, formerly known as the Pensions and Lifetime Savings Association. They reveal that a couple wanting to enjoy a moderate standard of living in retirement could need a pension pot valued at between £165,000 to £250,000. It also shows that a single person wanting the same standard of living will need a pension pot worth between £330,000-£490,000.
The estimates are based on annuity rates in 2025/26
As you can see, the amount of money you may need to release from the sale of your home could be significant. While this might not be an issue if you’re looking to move to a less expensive location, it could be more of a challenge if you want to remain in your current location, or move to somewhere more expensive.
Selling your home could be emotionally challenging
It’s also important to consider the emotional impacts of selling your home, especially if you have lived there for many years. The memories created, as well as the emotional connection with the property, could make it difficult to sell your home when you reach retirement.
Furthermore, if you have strong friendships with your neighbours or local community, selling could become all the more difficult. Because of this, you might delay selling your home, or choose not to sell it at all, which could then create a financial headache if the cost of keeping it becomes prohibitive.
It’s also worth remembering that moving house can be expensive with estate agent’s fees, as well as surveys and legal costs, having to be met. Alongside these, you could also face a significant Stamp Duty Land Tax liability.
As these costs could reduce the amount of equity that’s released from your home even further, it could have an even greater impact on your standard of living in retirement.
Get in touch
While downsizing your home may be right for you, it’s important to speak to a financial adviser, as they can confirm whether it is the best option for you or not. If the amount of equity you can release is not going to provide you with the dream retirement you want, a financial adviser can help you understand your options.
As a result, they could help you get financially ‘on track’, so that you can enjoy the standard of living in retirement you would want. If you would like to discuss this further, please call us on 0333 010 0008 and we’d be happy to arrange a no obligation initial meeting with one of our independent financial advisers.
18 August 2025