A survey out this week reveals a third of Britons expect to use their homes to help provide an old-age income, but many people may fall short as house sales may not give them enough money in retirement.

While a minority of people will be able to downsize their properties and use the extra capital to buy a substantial annuity, selling a home to fund retirement will not be a viable solution for most, according to the preliminary results of a survey by Mercer Human Resource Consulting.

Analysis shows that an average UK house costing £173,000 could be sold to buy an annuity worth about £6,700 a year after tax. But with average annual rental costs at £6,800, this annuity would provide negative net retirement income. Even in the West Midlands, where average rental costs are lowest relative to house prices, annual retirement income after tax and rent would only be £1,900.

The same analysis showed that someone choosing to downsize from an average semi-detached home to an average terraced house would be able to buy an annuity of just £1,100 a year after tax.

Dr Deborah Cooper at Mercer commented: "People with expensive houses who will be able to downsize are unlikely to be those who are relying on their homes as their main source of retirement income. For most defined contribution scheme members, selling a home to buy an annuity will provide little income, if any at all, once rental or re-purchasing costs have been taken into account."

She added: "If people fail to save enough now and rely on selling their homes to provide an income, they could be in for a nasty shock at retirement."