A new report claims those who privately rent properties before and during retirement will need to accrue a pension pot of around £450,000 to live comfortably, compared to around £250,000 for mortgage free homeowners.
With five million households in the UK currently rented, Stuart Price, Partner and Actuary at independent financial services consultancy Quantum Advisory, explores these worrying figures. He says: “Figures suggest the average annual rent is £6,500, roughly the same amount as your income from the State Pension, and this needs to be taken into account when planning your retirement.
“Already it is evident that people aren’t saving enough with the average pot worth around £35,000 – more than £200,000 short of what it should be, even for mortgage free pensioners. However, homeowners do have the option of downsizing, freeing up further money to supplement their income in retirement.
“For homeowners there is still this assumption that when you reach retirement, you’ll be mortgage free and your pension will be your spending money. However, with rising house prices preventing people from getting on the property ladder early on in life, this is becoming less of a reality.
“Finally, expecting the one in four households in Britain who rent to save nearly half a million pounds is a tough nut to crack, but with careful planning, solid advice and increases to minimum pension contributions in the future, which is a necessity, it can be achievable, and the earlier you start, the better.”
Stuart Price, Partner and Actuary at Quantum