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06 Dec 2017

Over-50s renters not saving enough to cover rent in retirement

Growing numbers of people are renting in retirement, but not everyone who is currently, or will be, living in rented accommodation is prepared for this extra cost in later life.

Research from Scottish Widows shows that renters aged 50 plus need to save more than £6,000 extra each year, or work for an additional five years, to cover growing rental costs in retirement.

One in eight retirees, equating to over 1 million people, are expected to be renting by 2032 — treble the current figure — and 42% of the average retirement income will be spent on rent.

Yet 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 the shortfall, with most saying they cannot afford to do so without a pay rise or significant compromise elsewhere.

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 15 years, but alarmingly few people are thinking about how they would cover the growing cost of a property lease when they stop working.”

Scottish Widows also warned that the situation is set to get worse, as more people struggle to get 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. And 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.

Douglas Cochrane, head of housing development at Lloyds Banking Group, noted that renting in retirement is sometimes a conscious choice but stressed the importance of fully understanding the financial implications.

“The importance of saving through pensions or other investments to offset later in life rental costs cannot be underestimated,” he said.

Copyright © M2 Bespoke 2017

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