More than six million people do not know how they will afford to pay their housing costs in retirement, according to new analysis from Royal London.
The survey found that 39% of adults who expect to pay housing costs in the future say they don’t know how they will meet rent payments or mortgage bills once they stop working.
Royal London found that a third (34%) of UK adults either expect to pay housing costs in retirement or are already doing so. Almost two thirds (61%) of people currently renting expect to have housing costs in retirement, compared with 37% of mortgage borrowers.
In addition, 45% of renters believe they will be paying rent for more than 10 years after they retire, while just 7% of mortgage holders expect to be making mortgage payments for that long.
The survey is the latest piece of research to cast light on the rising cost of housing and its effect on pension saving. One of the Pensions Commission’s areas of study is the expected increase in the number of people receiving a pension while also paying rent or paying off a mortgage.
Sarah Pennells, consumer finance specialist at Royal London, said retirement often meant reaching the point where housing costs were negligible as mortgages were paid off. However, for millions of today’s retirees and future retirees, that is unlikely to be true, she warned.
Pennells added: “Whether it’s renting for longer, taking out larger mortgages or stretching repayments over decades, more people are approaching retirement still facing significant housing costs.
“What’s particularly worrying is that over six million people who expect to pay rent or mortgage costs in retirement don’t know how they’ll cover those payments. If you’re heading towards retirement and expect to have housing costs, it’s important to factor these into your retirement planning as early as possible.
“Housing costs can make a huge difference to how far retirement income will stretch. Understanding what your housing costs could look like in later life can help you develop a more realistic picture of the income you’ll need in retirement.”
Sarah Pennells, Royal London
“Housing costs can make a huge difference to how far retirement income will stretch. Understanding what your housing costs could look like in later life can help you develop a more realistic picture of the income you’ll need in retirement.”
The findings come as rising housing costs and longer mortgage terms mean more people are likely to enter retirement still paying for a roof over their head. Younger adults are particularly affected, with 44% of people aged 18 to 34 expect to have housing costs in retirement, compared with 24% of those aged 50 to 69, according to Royal London’s study.
On average, homebuyers aged 18 to 34 have an original mortgage term of 31 years, and 43% took out a mortgage with an original term of 35 years or longer. By comparison, just 2% of retirees originally took out their mortgage for a term of 35 years or more.
The research also highlights how broader financial circumstances, including housing costs and income levels, can influence people’s ability to save for retirement and build long-term financial resilience.
Those who expect to pay housing costs in retirement have an average pension pot of £34,948, compared with £120,682 among those who don’t. The average pension savings figure across all respondents was £93,221.
