For the next generation of retirees, being able to afford a comfortable retirement is a growing concern.
In fact, the Guardian reports that 35% of those aged 45 to 54 haven’t started planning for retirement yet. Meanwhile, across all unretired people, just 13% of men and 8% of women have a comprehensive plan to be able to live their ideal retirement lifestyle.
In some cases, your home might be able to open the door to a comfortable retirement. With HM Land Registry reporting that average UK property prices rose by 3.7% in the year to June 2025, homeowners may be able to unlock significant funds by downsizing in retirement.
Read on to discover the financial and lifestyle considerations when contemplating selling your home in retirement.
Downsizing could release funds to complement your retirement income
Firstly, moving to a lower value property could free up a significant amount of cash to live more comfortably in retirement.
According to Pensions UK, as of 2025, a comfortable retirement on average costs £43,900 a year for a single person, or £60,600 for a couple. This includes:
- Car replacements every five years
- An annual two-week four-star holiday in the Mediterranean
- Three UK weekend breaks a year
- £1,548 to spend on clothing each year
- £1,000 per year for family support.
Even if you’re already on track to retire comfortably, releasing funds from your home could enable you to enjoy more luxuries or offer more support to your family.
Additionally, with careful financial planning, you could save and invest the funds from your home to boost your annual retirement income with interest payments and investment returns.
A smaller home could reduce your expenses in retirement
In their estimated costs for a comfortable retirement, Pensions UK also factored in expenses for maintaining your home.
- £600 to maintain your property’s condition
- £300 contingency.
However, a smaller property in good condition may require less ongoing maintenance than your current home. Not only could this save you money in retirement, but it could also mean less stress and manual labour later in life.
Additionally, you may find some bills will be lower for a smaller property, such as utilities and insurance. These savings could add up to a potentially significant sum over the course of your retirement.
You may find a new home will be better suited to your needs in later life
By moving to a home better suited to your future needs, you may find you’re able to enjoy life more comfortably. With many people living longer, it’s important to consider your future accessibility needs.
As mentioned, a smaller home can also require less maintenance. Even regular cleaning can become burdensome when you have a larger property. Moving somewhere more suited to your needs could help free up more time to enjoy hobbies and time with loved ones.
As well as your physical needs, you might also consider your ideal lifestyle in retirement. For example, if you want to enjoy more gardening, be closer to loved ones, or move to the seaside, selling your home could help you realise those dreams.
You might not necessarily miss out on the Inheritance Tax residence nil-rate band
You might be concerned about how selling your home could impact your estate’s Inheritance Tax (IHT) liability.
As of 2025/26, the residence nil-rate band allows you to pass your primary residence to direct descendants without them having to pay IHT on the first £175,000 of the property value.
In some cases, you might sell your home and choose not to purchase a new one, such as if:
- You move in with family or friends
- You choose to rent
- You move into residential care.
According to Fidelity, you might not necessarily lose out on your residence nil-rate band in these instances. Provided you meet the following criteria, you may be eligible for a “downsizing addition”:
- You sold your home on or after 8 July 2015
- Your estate would have qualified for the residence nil-rate band if you hadn’t sold your home
- You leave some of your estate to direct descendants.
If you’re eligible for the downsizing addition, your residence nil-rate band may be the same as if the property was still in your estate.
You could lose out on value by selling early
With house prices continuing to rise, your home could be worth more if sold later.
That said, as of October 2025, MoneyWeek reported that the top savings rate available with an easy access account was 4.5%. With average house prices rising by 3.7%, your wealth might grow faster by saving in a high-interest account than by relying on property appreciation alone.
It’s worth noting, however, that actual property value increases can vary, while interest rates will change over time. As a result, it can be difficult to know with any certainty how much you stand to lose or gain by selling your home early.
You might not be ready to let go of your family home
Finances aside, it’s important to consider the emotional element of selling your family home.
You or your partner may simply not feel ready to leave a home where you have lived for several years, or even decades. Most likely, you have many happy memories in your home, and you may wish to stay living there for the rest of your lifetime.
If your current home meets all of your current and future needs – or can be adapted to meet them – and you have other sources of funds to live comfortably in retirement, downsizing might not be the right choice for you.
Get in touch
If you’re thinking about retirement planning – whether that involves downsizing to fund retirement or finding the funds to live comfortably in your current home – get in touch to find out how we can help.
Email us at [email protected], or call 01273 076 587.
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.
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 pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
The Financial Conduct Authority does not regulate estate planning.
