propertyRui Vieira/PA Wire

As a nation we're dogmatic when it comes to saving for retirement. We don't trust pensions so we're not going to plough money into them when we have a gut feeling they are a 'bad thing'. However, we do like property - the value of our home went through the roof for decades and it's going to keep us warm in our retirement. So often we hear people state simply 'my property is my pension.'

However, new figures reveal just how dangerous this approach is.

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Falling

The Key Retirement Solutions Pensioner Property Index shows that in the last three months the total value of the properties held by the UK's pensioners fell an incredible £3.64 billion. That's around £787 each. Those over the age of 65 in Wales, Scotland and the South West saw the biggest values knocked off their properties.

The average over-65 homeowner in Scotland lost £6,399 in the past three months while in Wales they were £2,062 worse off and £2,063 in the South West. Over-65 homeowners in London suffered a £1,210 drop but have still seen average gains of around £20,000 in the past year.

Meanwhile, there were parts of the county where values rose. The biggest winners were pensioners in the West Midlands who gained £980 in the three months, while over-65s in the East of England were £636 ahead. In Yorkshire & Humberside property equity increased £421 and it rose £495 in the North West.

Dean Mirfin, Group Director at Key Retirement Solutions, said: "The housing market remains volatile with areas such as Scotland, the South West and Wales seeing major swings. Even London has seen a drop after racing ahead throughout most of 2012."

The risks

This highlights the risks of considering your property as a pension. Recent research from Barings Asset Management found that 29% of people expect to use their property to fund their retirement - that equates to 10.5 million people who could be in for a shock if the current trends continue.

Marino Valensise, Chief Investment Officer at Barings, comments: "It is astounding that over one in ten people have focused all of their retirement planning on property. This suggests poor planning in terms of asset allocation, and a poor understanding of the risks involved, by large numbers of people in the UK."

Alternatives

Of course, the alternatives aren't perfect. While pensions remain exceptionally tax-efficient ways to save for the future, you are then faced with buying an annuity at the end of the process, and as we reported earlier in the week, increased longevity and movements in the gilt market mean that these are returning thousands of pounds less to pensioners during their retirement too.

It's one reason why Barings found that 44% of people do not currently expect to use a pension to fund their retirement. However, pensions should not be written off: they provide a guaranteed income with tax benefits, and as such are a vital, stable, portion of your retirement income.

The answer is a sensible balance of different sources of income, including a pension, investments, cash and property. Valensise says: "Assets such as cash and property, and instruments such as ISAs and investment trusts, can play an active role in retirement planning if managed correctly."

Clearly for many there is a role for property within the retirement income portfolio. The index shows that UK pensioners still have £752.7 billion of property equity, which is foolish to leave completely untouched if you are suffering financial hardship. And freeing up equity through downsizing or equity release remains a retirement option that may suit many.

The question is whether this property is being used as part of a planned investment strategy - or is simply a talisman for those who have no idea how else they will ever be able to retire.

What do you think? Let us know in the comments.