The latest research and analysis from Scottish Widows has revealed that one in eight retirees, over 1 million people, will be renting by 2032 – treble today’s figure.
According to the data, over 50s renters are not saving anywhere near enough to cover their rental costs in retirement, leaving a £43 billion shortfall.
In fifteen years, Scottish Widows estimates that 42% of the average retirement income will be spent on rent.
The average renter planning to retire in 15 years’ time would need to save an additional £525 every month into their pension – £6,300 a year – on top of current pension contributions, or work for an additional 5.1 years to cover growing rental costs in retirement.
Despite the looming crisis, more than two thirds (67%) of 50-64 year olds planning to rent in retirement have no plans to increase their pension contributions to cover this shortfall. 68% of those who would consider upping their contribution say they cannot afford to do so without a pay rise or significant compromise elsewhere.
The situation is set to worsen, as more people struggle to step onto the property ladder. More than a quarter (27%) of renters under the age of 45 don’t think they will ever be in a position to buy a property. Even among those who hope to buy a house one day, 15% anticipate they will still be paying off their mortgage well into retirement, rising to 26% of 25-34 year olds.
All too aware of the challenges ahead, renters across the country are also considering relocating for cheaper rent. Almost four in ten (39%) people planning to rent in retirement would relocate – rising to 65% in London, where rental prices continue to skyrocket.
Robert Cochran, Retirement Expert at Scottish Widows, said: “Generation Rent is a term often applied to younger generations, but our research shows that the problem extends right to the other end of the generational scale. The number of people renting in retirement is set to treble over the next fifteen years, but alarmingly few people are thinking about how they would cover the growing cost of a property lease when they stop working.
Whilst some people may choose to rent later in life, we also need to ensure it’s a more sustainable, secure option for an ageing population – many of whom will have no choice. We’re therefore urging the government to consider ways to refine the housing market to better suit older renters – through options such as open ended tenancy, with predictable rents and protection.”
Douglas Cochrane, Head of Housing Development at Lloyds Banking Group, added: “As this report recognises, renting in retirement can be a conscious choice and when making such a choice it is important that all financial implications for paying rent into retirement are fully understood. The importance of saving through pensions or other investments to offset later in life rental costs cannot be underestimated.”