Pension ‘crisis’ for renters as negative impact on retirement felt – act now
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The impact of renting on retirement has been substantial, and additional challenges have been created by COVID-19. And with statistics showing that renting is on the rise among older people in Britain, many may wish to evaluate their finances now. Looking further into the issue, Scottish Widows conducted a survey to understand how renting affects retirement.
The survey asked 5,757 people about their financial situation and plans for retirement.
And the results painted a dire picture for those who are currently renting.
One in four of those asked were found to not be saving anything at all towards their retirement.
This is double the number of homeowners who were found not to be putting money away towards their retirement.
Failing to plan ahead for leaving the workplace in this way can end up having catastrophic consequences.
This is because Britons will need a set amount of money put aside for day to day living costs as well as reaching retirement goals.
Without enough money for retirement, people may find themselves struggling to make ends meet, or unable to achieve the aspirations they had for later years of life.
Indeed, the report also found renters will often be thousands of pounds worse off in retirement than their home-owning counterparts.
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For this reason, and others, 28 percent of renters asked said they expect to never retire at all.
This is likely to mean the numbers of those working past state pension age will increase in the future.
Pete Glancy, Head of Policy at Scottish Widows, spoke to Express.co.uk about the inequalities in retirement preparation between renters and homeowners.
He said: “We’re heading for a renting in retirement crisis as people unable to climb the property ladder face a triple threat to finances – with no property assets, less money put aside and additional spend on rent during retirement.
“The rising cost of housing and a volatile job market is making it harder than ever for renters to play catch up with homeowners. Our latest Retirement Report estimated that the average renter will be almost £13,000 worse off at the point of retirement and spend more income in retirement on housing.
“This could leave them almost £9,000 a year worse off in retirement than a home owner. They will also miss out on around £240,000 in value built up in their home.”
But sadly, the issue for many renters has only been exacerbated and compounded by the COVID-19 crisis.
Financial disparities have widened within the last few months, leaving those renting at a cliff edge in terms of their funds.
Mr Glancy continued: “While government benefits such as mortgage or stamp duty holidays were a huge help to homeowners, they’ve left behind those struggling to pay rent after suffering a loss of income.
“As an industry we are also failing to adapt quickly enough to this difficult environment.
“With a quarter of renters expecting to never retire, major reforms are needed to end inequality in retirement planning.”
To improve the situation for renters, Mr Glancy suggested providing access to the pension of renters to help fund a deposit for a first home.
He also stated better guidance was necessary for those who cannot access property, to help them make a plan for their retirement.
And finally, a suggestion was put forward to create a single product to enable younger workers to build up a retirement fund and a deposit for a home.
Mr Glancy concluded: “We are calling for a new more flexible product, not for liberation of assets from existing pension structures.”
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