Young shun pensions for homes

YOUNG people are setting themselves up for hardship in old age as they shun pensions in order to step on to the property ladder.

The average age of a first-time buyer is now 34, and more than half of first-time buyers in their 30s without a pension do not think they will be able to save for retirement, preferring to chase their dream of home ownership.

The research from insurer Prudential found that debts from higher education, combined with soaring property prices, have pushed the average age of a first-time buyer up to 34. The figures constrast to their parents' generation - more than 60% of people aged over 50 bought their first house before they were 30, according to a recent poll by research firm YouGov.

Prudential warned that the shift meant a quarter of young people wouldn't have cleared their home loan by the time they were 60, leaving them with no mortgage-free time to focus on their pension. Around 95% of people who waited until they were at least 35 to buy a property, and have not yet started a pension, did not ever expect to pay into one.

Prudential is predicting the situation will have a big impact on the way people fund their old age, with increasing numbers of people relying on their property to see them through retirement, either by downsizing or unlocking equity from their home.

Ali Crossley, director of lifetime mortgages at Prudential, said: 'Our findings suggest that millions of UK homeowners will find it difficult to fund retirement in the traditional manner with a pension.

'It will prove especially difficult for first-time buyers who are pushing thirty who have not yet started saving into a pension. They are likely to find that the burden of debt from education and the impact of large mortgages will take up a lot of their income and prevent them from saving.

'Everybody has to fund retirement somehow, so these people are very likely to look to ways of releasing equity in their homes such as using a lifetime mortgage.'

The news follows worrying research from Friends Provident last week, warning that just 6% of women have made sufficient provisions to be comfortable in retirement.

Around 46% of women say they do not expect to receive any income from a private pension, while only 30% have occupational pensions and just 3% think the Government will provide them with enough income. Unsurprisingly, 42% of women said they thought they would be worse off in retirement than they are now, compared with 31% of men.