Older renters £2,000 worse-off than homeowners – the risks of renting in retirement

Pensioners may face a poorer retirement if they are still renting compared to those who own their own home.

Renting can provide flexibility, and some may not be able to afford to buy a property due to high house prices, but new research highlights the financial risk of being a tenant in your golden years.

Consultancy Barnett Waddingham’s latest At-Retirement Report claims renters have higher expenses, meaning they can save lower amounts into a pension, affecting their retirement income.

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It comes as research by Independent Age shows a 55% rise in over-65s renting during the past decade.

Barnett Waddingham warns that while a mortgage is typically repaid by the time someone retires, renting provides an ongoing expense that can even grow.

What are the risks of renting in retirement?

The latest estimates from the Pensions and Lifetime Savings Association suggest that the cost of a comfortable retirement is around £43,100 per year for a single person.

Barnett Waddingham’s analysis found that the expected retirement income for homeowners will already fall short at £21,000 per year, but renters are expecting even less at £19,000 per year – a £2,000 difference.

The survey found that around two-thirds of both homeowners and renters feel they can afford their desired housing costs.

When it comes to expected costs in retirement, homeowners are expecting them to stay the same or decrease, while a third of renters expect their housing costs to rise during retirement.

The research also suggests that homeowners are more engaged with their finances and investments than those who rent.

This could be an issue, with data from Standard Life suggesting tenants may need an extra £400,000 in their pension for their retirement to keep up with rising rents.

Paul Leandro, partner at Barnett Waddingham, said: “One of the most critical wires in the ticking pensions timebomb is the bleak outcomes for renters in retirement, especially when compared to their homeowning counterparts.

“With more than a quarter of working over 50s still renting, this cohort is at high risk of a difficult later life. The confidence gap stems not just from current homeownership status, but also wider financial planning and awareness.”

Leandro said renters face dual challenges of lower confidence and less engagement with retirement planning and tangibly worse financial situations, adding: “There have been calls to allow people to use their pension savings to pay for a house deposit, but this goes against the need to accumulate as much as possible before retirement.

"Policymakers need to create a better framework that allows someone to save tax efficiently for a house deposit as well as for pension income.

“Alternatively, if there are structural ways – like home equity release – for housing to form part of the retirement framework, then combining the two may be possible. What’s clear is that this issue won’t just go away; we need direct intervention to protect this at-risk renting cohort.”

The pros and cons of renting in retirement

There can be benefits to renting in retirement.

You may not have to worry about paying for maintenance and it provides more flexibility to relocate more easily, whether to be closer to family, downsize, or move to a more suitable environment as needs change.

However, renting introduces an ongoing monthly expense that can persist indefinitely.

Anita Wright, chartered financial planner at Bolton James, said: “This cost must be factored into retirement income planning. Moreover, rental prices are subject to inflation and market pressures, meaning rents may increase over time, potentially outpacing the growth of retirement income.

“This can place strain on retirees’ finances in the later stages of retirement, especially as other costs – such as healthcare – may also rise.

“For homeowners, selling a property to rent can release capital to bolster retirement savings or fund lifestyle goals, including care needs. While renting can simplify aspects of later life, the recurring and potentially rising cost must be carefully integrated into long-term financial planning.”