There’s a fair chance that your home is your most valuable asset, both emotionally and financially.
Yet, it could also offer several ways to fund your dream lifestyle in retirement. Of course, your pension may form the bedrock of your income, but your property could still play a significant role in supporting your goals.
With this in mind, continue reading to discover three ways your property could support you in retirement, as well as the benefits and downsides of each option.
1. Letting out a room or an entire property
One way to boost your income in retirement is by letting out part, or all, of your property. Doing so could allow you to generate a steady stream of income to supplement your pension.
According to Zoopla, the average rent for new lets in the UK reached £1,287 as of April 2025. Moreover, rents have risen by 21% over the past three years, far outpacing house price growth of 4%.
Renting out property can also be relatively low effort, especially if you use a property management company.
If your health deteriorates and you move into care, or into your children’s home, you may even decide to retain your home and rent it out to provide ongoing income.
However, it’s important to note that rental income is usually taxable, and the property could still form part of your estate for Inheritance Tax (IHT) purposes.
You could make use of the “Rent a Room Scheme”. This allows you to earn up to £7,500 each year without paying tax (or £3,750 if the property is shared with another person, such as a joint owner).
But if you’re still living in the property, sharing your living space may not feel suitable during retirement.
You will also need to account for the cost of repairs and any periods when the property is empty.
While renting out your home could make for an effective way to bolster your income in retirement, it’s vital to keep both the emotional and financial considerations in mind. Otherwise, you could find that you face a larger-than-expected tax bill, or you lose some of your privacy.
2. Downsizing could allow you to free up wealth by moving to a smaller home
As you approach retirement and your children have left home, you may find that you no longer need as much space as you previously did.
Due to this, downsizing by selling your current home and purchasing a less expensive one could allow you to release a lump sum of wealth.
You could then invest this newfound wealth to generate additional income or simply keep it as a rainy-day fund to help you secure some peace of mind.
Alongside this, downsizing can often reduce your day-to-day expenses, as you may find you spend less on heating, utilities, and general upkeep.
A smaller property can also be easier to maintain, which is especially beneficial as you get older and household tasks become more demanding.
Downsizing could even allow you to retire to somewhere you’ve always wanted to live but previously couldn’t afford.
However, it’s vital to remember that moving home comes with significant costs, such as estate agent fees, conveyancing charges, and potentially SDLT, which can quickly erode the wealth you release.
You may also find that there’s an emotional element to downsizing. Leaving a family home can be challenging, and adjusting to your new property may take time.
It’s important to weigh these factors carefully before deciding to move.
3. Equity release enables you to borrow against your property for a lump sum payment
If you don’t want to move, equity release could offer another way to access the wealth tied up in your home.
Simply put, it involves borrowing against your property – or selling a share of it – while retaining the right to live there.
There are typically two types of equity release products:
- Lifetime mortgages – These allow you to borrow a lump sum, which you then repay when your home is either sold or when you pass away.
- Home reversion – These allow you to sell part, or all, of your home, but retain a legal right to continue living there.
Perhaps the most obvious benefit of equity release is that it provides access to funds without having to move or sell your home.
This could be particularly beneficial if your home has risen in value since you purchased it, or if you have limited other assets to rely on in retirement.
Equity release could also reduce the overall value of your estate, which may reduce the IHT liability for your loved ones when you pass away.
Just note that there are some significant risks that come with equity release.
Interest on mortgages can compound considerably over time, meaning the debt can grow quickly and might even eventually equal the value of your home. This could leave less for your loved ones to inherit.
Thankfully, if the provider is a member of the Equity Release Council, neither you nor your estate will ever owe more than your property’s value.
What’s more, releasing a lump sum could increase your capital, which may affect your entitlement to means-tested benefits. This might mean you have to pay more for care if you ever need it.
Read more: Debunking 3 common myths about Inheritance Tax and care costs
While equity release can offer flexibility, it’s not suitable for everyone, so it requires careful planning before you commit to it.
A financial planner could help you assess your options
With so many different ways your property can support your retirement, deciding which best suits your unique circumstances can be challenging.
Each comes with its own financial and emotional considerations, and the right decision might depend on your goals, health, and the value of your assets.
Our team of independent financial advisers in Lewes could help you secure some much-needed clarity.
We’ll help you weigh the pros and cons of each option and assess how they could affect your long-term financial security.
We’ll also ensure that any decisions you make fit in with your retirement plan.
To find out more, please get in touch by emailing us at financial@barwells-wealth.co.uk or by phone on 01273 086311.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning or tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
The Financial Conduct Authority does not regulate buy-to-let (pure) and commercial mortgages.
Think carefully before securing other debts against your home.
Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.
A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration.
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