Pensioners spending billions on rent
Pensioners who rent during retirement are £133,117 worse off than their home-owning counterparts, according to research by Friends Provident.
Over £23bn is spent by UK pensioners on rent every year and by not making a step onto the housing ladder during their younger years, renters are entering a trap that becomes increasingly difficult to escape, particularly as their income levels out during retirement.
A consistent drain on retirement income from rental costs means that pensioners could face increasing levels of poverty, especially if rental costs increase dramatically. Luxuries they are accustomed to such as holidays and eating out could also be restricted.
In order to maintain a rental property during retirement a pensioner needs to have an annual income of £11,491 to cover rent, utilities, ground rent and service charges. In comparison the average home owner needs only £3,020 each year to maintain their property. On average Britons own their home outright by the age of 48 meaning that the majority of British homeowners have no mortgage to pay during their retirement.
Calculations from Friends Provident show that in order to maintain a rental property over 16 years (the average length of retirement), a 23-year old needs to save 275% more than a home owner and this increases to 291% for someone aged 43. These figures emphasise how important it is to make decisions about where you will live during your retirement and make sufficient plans and savings to be able to afford to keep a roof over your head and maintain your lifestyle.
Jeremy Ward, head of pensions marketing at Friends Provident, said: “Renting a property can often be a difficult cycle to break out of due to the initial money and deposit needed to purchase a house.
“Renting during retirement creates further difficulties and means that renters need to be more prepared and have a much larger annual income in retirement to keep a roof over their heads. In turn this means that renters need to be aware of the extra income required and make provisions for this in their pension planning.”