Only 16.3 per cent of older workers who rent are on track for a moderate retirement income compared to 57.7 per cent of people who own their own house, according to Hargreaves Lansdown.
According to the Hargreaves Lansdown Savings and Resilience Barometer, a single person would need a retirement income of £20,800 per year, while a couple would need £30,600, according to the Pensions and Lifetime Savings Association’s standards for retirement income.
The ability of older workers to accumulate surplus income is also hampered by renting, where just 26.2 per cent do so compared to 57.7 per cent of homeowners in the same age group.
Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey says: “Soaring house prices and rent have put huge pressure on people’s finances with the retirement resilience of older workers, in particular, is affected. Increasing house prices mean more needs to be saved for a deposit but rising rents mean you can’t afford to put enough away – it’s a vicious circle that keeps your housing costs high and in turn limits how much you can put away for your retirement years.
“According to the HL Savings and Resilience Barometer, only 16.3 per cent of older workers who rent are on track to receive a moderate income in retirement. This means they face the prospect of having to work for longer to make ends meet. Younger generations seem to be faring slightly better with 24.5 per cent of generation Z who rent on track for a moderate retirement along with 22 per cent of millennials. They will have benefited from a working life being auto-enrolled into a workplace pension, something older workers and many from Generation X (17.3 per cent of renters on track for moderate retirement) will have missed out on.
“The traditional view is that you enter retirement with your mortgage paid off which means your income needs are lower. Renting into retirement undoes this idea as money needs to be found for rent throughout.
“This pushes up day-to-day retirement costs and means much more needs to be saved for retirement to account for it. As the prospect of home ownership gets further out of reach for many people, they will need to brace for the prospect of saving for increased costs in retirement to compensate.”
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