Don't downsize for retirement

ANYONE who hopes to fund their retirement by downsizing their property is likely to be disappointed. Most people who sell up and move to a smaller house find they are left with surprisingly little cash once they've doneso, with moving costs and other expenses eating significantly into their equity.

Only people who live in a detached property or who own a home in London and the South East are likely to have as much as £50,000 left after downsizing. Many people could even find themselves out of pocket.

According to research from the Prudential, someone moving from London to a similar-sized property in a less expensive region would be able to release at least £99,000 from their home. This figure doubled to £188,931 if they relocated to Northern Ireland.

Similarly, a homeowner in the South East could make at least £21,000 if they moved to another region other than London. This rose to nearly £90,000 if they went to Northern Ireland and £77,000 if they went to Scotland.

But there are only two regions someone in the East Midlands could relocate to and make money if they wanted to stay in the same sized property. The position is worse for anyone living in Scotland or Northern Ireland ? someone in Scotland could only move to Northern Ireland, andpeople there would have to move to a much smaller home if they wanted to unlock any cash at all.

Removals costs eat significantly into the potential profit. Average costs of moving home are around £6,200 and in London they're higher still, an average £13,200. This means that anyone in the South East who wanted to move to a similar sized house in the South West would clear just £20,720, nearly a third of which would be eaten up by the cost of relocating.

The situation is not much better for people who want to stay in the same area but move to a smaller home. The group estimates that moving from a semi-detached house to a terrace house would release an average of just £22,000 in equity across all regions, around a quarter of which would be eaten up by moving costs.

In order to release a large amount of money, people would have to move from a detached home to a terrace house, which would release an average of£111,747. Moving to a flat would unlock about £112,478. But how happy they would feel at the prospect of living out their days in a house that's a fraction of the size of the property they enjoyed during their working lives is a question for psychologists rather than financial advisers.

Ali Crossley, director of Prudential Lifetime Mortgages, said: 'With over a million pensioners planning to move home for financial reasons, thisreport makes for a sober read. The long-held belief that downsizing is a way to plug the pension gap is only true for a minority of people, who live in detached houses or London and the South East.

'Also, not only is it practically impossible for people in some regions to downsize to release equity, it is true that the large cost of movinghome will eat into their profits. They may not end up with as much cash as they expected.'