Rising rental costs are putting a lot of pressure on people’s expected retirement income, a report has revealed.
The Scottish Widows report looked at what percentage of income people across the country can expect to spend on rent in retirement.
Places where retirees will typically not see their income at least cover their rent include London and the South East.
It follows separate Hamptons research that suggested the number of households age 65 and older renting their home will double to more than a million in the next decade.
The Scottish Widows report looked at the percentage of income that retired people spend on rent.
He claimed the numbers would more than double from 402,963 last year to 1,003,382 by 2033.
Places where those who rent in retirement can expect to spend at least 80 per cent of their income on their monthly rental payments include the East of England, the South West and Scotland, at 98 per cent, 89 per cent and 82 per cent respectively.
In these areas, a lack of supply and high demand have helped put rentals out of reach for many, including retirees.
By contrast, the region where retirees can expect to spend the lowest percentage of their income on rent is the Northeast at 59 percent.
There are four regions where retired people can expect to spend between 62% and 69% of their income on rent.
These are Wales, where they will spend 62 per cent of their income on rent, the North West at 65 per cent, the East Midlands at 66 per cent and the West Midlands at 69 per cent.
The lack of supply and high demand have helped put rentals out of reach for many people, including retirees.
Pete Glancy, of Scottish Widows, said: ‘Escalating rental costs pose a significant challenge, particularly for those with lower retirement income.
‘It could become extremely difficult for them to reach even a minimum retirement standard.
“As a result, many may rely on housing benefits or be forced to downsize to smaller, more affordable housing to mitigate the burden of rental costs.
‘This has serious consequences for the ‘Income Generation’, who will have to save much more for their retirement.’
It comes after the Office for National Statistics revealed that the number of households renting has more than doubled in the last two decades.
Approximately five million households in England and Wales are renting privately, which is an increase from 3.9 million in 2011.
Mr. Glancy added: “On the other hand, homeowners have the added option of freeing up equity in their home later in retirement.”
The Scottish Widows Retirement Report went on to say that while many people are preparing well for retirement, a substantial minority are falling behind.
Enjoying a basic level of comfort in retirement includes being able to pay your rent, something that is under pressure as rents rise across the country.
Retirees renting and living in London and the South East bear the brunt of rising costs
The average price of renting a house outside of London has hit a record £1,231 per month.
The picture is even more dire for those looking to rent in London, where typical values have also hit a record £2,567 a month.
Rightmove data means average rents have increased by £300 a month outside London and £559 a month in London compared to pre-pandemic in 2019.
Rightmove explained that there is fierce competition between tenants for properties, and it takes just 17 days to find a tenant for a property.
The average rent asked for a typical house outside of London is now 33 per cent higher than it is right now in 2019, rising by more than £300 from £923 per month.
It’s a similar story in the capital, with average sales rentals in London hitting a new quarterly record of £2,567, and while the pace of rental growth has slowed slightly, it remains in double digits for the seventh consecutive quarter.
Rents in London are now 28 per cent higher, the equivalent of £559 per month, than they are at the moment in 2019.
How the revenue percentages were calculated
The pressure that rents put on people’s expected retirement income was examined by the Scottish Widows Retirement Report.
It examined average annual rental costs as a percentage of expected average retirement income.
It took the annual rental cost for the average property in each region, from a combination of government sources, including the Assessment Office Agency, the Scottish Government and the ONS.
He compared these annual rental costs to the retirement income that the average person is on track in each region.
This projected retirement income was calculated by Scottish Widows, based on the current savings and behaviors of people who responded to its annual retirement report survey.
Account for your private pension savings, state pension, and any other long-term savings and inheritance that you expect to use in retirement.
He calculated the percentages by dividing the annual rental cost of the average property in the relevant region by the retirement income that the average person is on track in the relevant region.
In the annual retirement report survey, we asked people if they expected to rent in retirement.