How to use your home as a pension fund
With planning - and luck - a home can become your investment for retirement, says Fred Redwood
SINCE the rainy day in August 1980 when Dr Chris Blockley first set eyes on his house, Colts Bushes in Rowhook, West Sussex, the property has become the dentist’s family home and his place of work. Now it is to serve its most important function – it is to be his pension fund.
“I’m one of the lucky ones who borrowed as much as possible in the 1980s,” he says. “Now I’m left with a mortgage of less than 10 per cent of the value of my house. Realising that equity will help fund my retirement.” Many other owners of expensive homes are doing the same. According to the estate agent Savills, a wish to “downsize” is the reason behind 30 per cent of sales in the country-house market – little wonder when you consider how dramatically houses such as Blockley’s have appreciated in value.
The three-bedroom house that Blockley, 63, bought with his wife, Sally, 53, cost just £77,000 27 years ago. It is now on the market for £1.65 million. The house was by no means a show home in 1980, however. “The worst thing about it was the kitchen, which was painted bright orange and had what I’d call that ‘hacienda’ look,” says Mrs Blockley. “The dining room was painted bright red and on the stairs there was a curling, wrought-iron, shiny black balustrade. That’s to say nothing of the goats and geese all wandering around outside. Think Darling Buds of May. . .”
Yet Blockley could see the potential. It had five acres of paddock and two acres of woodland, which would prove to be ideal for his growing family. He has two sons: Justin, now 34, and Kyle, 31, from his first marriage and two more – Charles, 24, and William, 21 – from his marriage to Sally. “We were able to race gocarts,” says Blockley. “There was lots of room for cricket and football – it was a marvellous place for growing boys to let off steam.”
Despite being rather poky inside, with obvious cosmetic flaws, Colts Bushes was “mendable”. Remedial work began in 1982, when Blockley had a surgery built onto the house with a bedroom above it at a cost of £20,000. In 1989 a sizeable kitchen extension was built at a cost of another £20,000. At around the same time a study was built between the house and the barn outside, costing £10,000 and in the early 1990s a car port was built, costing £6,000. Blockley’s total outlay on the house has been £133,000.
The property has been transformed. There is a lovely, low-ceilinged, “cottagey” drawing room with a big fireplace and French doors leading out to the grounds, a quite formal dining room and a farmhouse kitchen. There’s also a family/sitting room and a dentist’s surgery that could easily be turned into a study. Upstairs there are six bedrooms, and outside is a tennis court, an entertainment barn for parties and a stable block.
Blockley was fortunate to buy in this area when he did, because the Surrey/Sussex borders around Horsham were just becoming extremely fashionable. In the 1980s it became known as the “rock star” belt. Eric Clapton was there, as were Phil Collins and Mike Rutherford of Genesis, Kenny Jones of the Small Faces and the record producer Glyn Johns. The area’s employment prospects also improved, notably when Sun Alliance moved its main office to Horsham, which created yet more demand for homes.
Now Blockley is planning a comfortable retirement, which will involve downsizing. He expects to spend about £800,000 on a new home; the rest he will add to his pension fund and put aside for the boys.
“I have calculated that I’ll need around £50,000 a year to keep ticking over,” he says. “I have a holiday home in Spain which cost me €300,000 some years ago, so my main luxury will be spending time there on a regular basis.” His two elder sons are now property owners themselves – Justin lives in Ascot and Kyle has an apartment in Singapore. However, William and Chris are both living at home at present and Blockley anticipates giving them a helping hand onto the property ladder. He has already signed over the ownership of the property in Spain to the boys, and if one of them so wished he could get a low-interest euro mortgage using the house as collateral.
If need be, Blockley will help more directly. “I’d question whether pension funds will adequately meet the needs of the younger generation,” he says. “Look at what has happened to pensions over my working lifetime – the Robert Maxwell affair and Equitable Life, in which I had my own fingers burnt. I’ll do what I can to help get the boys on the property ladder. Is there a pension fund that would have paid me the £1.5 million that I have made from this property over the past 27 years? I don’t think so.” Colts Bushes, Rowhook, West Sussex: Browns Estate Agents,