People renting in retirement could need an additional £391,000 in savings compared to those who have paid off their mortgage, research from Standard Life has revealed.

The analysis comes after the average price of a UK property coming to market hit £375,000 in May, highlighting the challenges facing those looking to get on the property ladder.

Figures released by the Office for National Statistics (ONS) showed that the average monthly rent in the UK is currently £1,246, with annual rent increases since 2016 jumping by 2.5 per cent.

Standard Life projected these costs forward from state pension age to average life expectancy, with "significant" regional variances with the total sums required, ranging from £660 for the North East and £2,060 for London in year one.

By the end of the 20-year period, the same cost would be £1,060 for the North East and £3,290 for London.

However, in reality, year-by-year rental increases will vary subject to factors including inflation and interest rates.

The Pensions and Lifetime Savings Association recommends that pensioner couples need a minimum of £22,400 a year in retirement to cover essential needs and some discretionary spending, but this excludes housing.

Standard Life said this means renters could find that they require total savings of £839,000 per household over the course of 20 years in retirement, an 87 per cent increase compared to those who are rent and mortgage-free, who would require a smaller amount of £448,000.

Standard Life managing director of individual retirement, Claire Altman, said: "For many people, their home not only has emotional significance, but it is also something they may expect to rely on in retirement.

"However, if house prices continue to rise, people will increasingly need to think about how they will meet essential housing costs in retirement, with the Pensions Policy Institute predicting the proportion of households that will own their home in retirement could fall from 78 per cent to 63 per cent by 2041.

"For those who don’t eventually buy, these figures highlight the likely additional savings to be factored into budgeting, which is unlikely to be achieved through contributing the minimum amounts to a pension.

"This will have knock on consequences for how people manage their retirement income too, as people look to find ways to secure their fixed rental costs, which could be through annuitising in tranches, an inflation-linked annuity, or other means."

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