Brits are losing faith in using property as a retirement income as property prices fall and threaten UK homeowners with negative equity.

There has been a “dramatic loss of faith” in using bricks and mortar as a pension, according to research from Alliance Trust, which found that just 33 per cent of people think their home will be the main contributor to their pension pot, compared to 43 per cent last year.

Whereas faith in generating a retirement income from property was in first place in 2007, it has fallen to second place this year, overtaken by the level of trust being put into company pension schemes, which has increased from 36 per cent for 40 per cent.

“While property prices have been growing rapidly over recent years, the onset of the credit crunch has had noticeable effects on the housing market.” explained Steve Latto, pensions development manager at Alliance Trust.

“This no doubt has led to many people re-assessing their pension provisions. It is not surprising that faith in property has fallen already this year and may decline further because of the exceptional financial crisis we are living through and the likelihood that we are heading for recession.”

There has also been an increase in the number of Brits who are hoping for an inheritance or windfall, with 21 per cent pinning their retirement income hopes on this compared to 18 per cent in 2007.

Other funds from which people expect to source their income when they retire include a personal pension, stock market investment, business ventures, and their partner or spouse – either present or future.

Mr Latto said that these figures reflect the importance of effective retirement planning, and urges them to consider diversification as a way of “offsetting the risks inherent in all kinds of investments.”

“People often don’t appreciate there are many different ways to save for their retirement and they should be prepared to re-assess their investments as circumstances change.” he added. “ISAs, for instance, can be a good way to start, and can be transferred into a pension fund later in life. The most important thing is to investigate the best way to start saving as early as possible and pay attention to your spread of investments so as to help build a pension pot when it comes to retirement age.”

© Fair Investment Company Ltd