The economic fallout from the Covid crisis could have long-term consequences and damage the housing and retirement prospects of future pensioners, according to a report by the Pensions Policy Institute.
Its latest report, looks at the changing housing landscape in the UK, and the implications this has on current and future retirement market, particularly in terms of the growing private rental sector.
PPI senior policy researcher Mark Baker says: “People are finding it harder to get on to the property ladder, meaning that a growing number of people may enter retirement with no property equity at all, and will face the extra costs associated with renting their homes.
“Those who do buy are also more likely to reach retirement with some level of mortgage debt. This means that in the future more people will enter retirement with less security and equity in housing.
“The short-term cost to the economy of the Covid-19 pandemic is difficult to assess but could have long-term implications for people, as saving for a deposit for a home as well as saving for a pension become less feasible due to higher unemployment and diminished job security.”
The report, sponsored by Scottish Widows, says that those who have never been able to buy a property could find that renting in retirement will mean that a significant amount of their income will be spent on ongoing basic housing costs, meaning that they will need a higher retirement income to achieve an adequate standard of living.
It suggests that improved access to social housing may help alleviate this issue, and could result in an increase in disposable income and living standards as well as increased security of tenure. However the report says that for this to happen more investment in social housing from government is needed.
Baker adds: “There is no one-size fits all approach to helping people achieve a higher standard of living, and the report identifies a number of ways in which homeowners and renters can be supported to achieve greater adequacy in terms of their retirement income.
“People who own their own homes in retirement may also need support to save more into a workplace pension in order to achieve a standard of living in retirement that meets their expectations. Others may benefit from being able to use financial products that encourage saving for a mortgage during their working lives.”
He adds that the report represents a challenge to industry and government to support people to negotiate the housing market successfully in order to hep them achieve higher standards of living in retirement.