Renters and single parents likely to struggle to reach moderate retirement income

People who rent their homes and single parents are likely to struggle to save enough into their pensions for a moderate standard of living in retirement, according to Hargreaves Lansdown’s Savings and Resilience Barometer.

It found that just 20.2 per cent of renter households were on track for a moderate retirement income, compared to 58.7 per cent of homeowners.

Meanwhile, only 19.6 per cent of single parents were on track, compared to 48.8 per cent of couples with children.

The Pensions and Lifetime Savings Association's (PLSA) standards state that a single person would need a retirement income of £20,800 a year for a moderate standard of living, while a couple would need £30,600.

Self-employed workers were found to be more likely to be on track for a moderate income in retirement than renters or single parents, although they were still less likely than employed households.

Almost half (49.6 per cent) of employed households were on track for a moderate retirement, compared to 27.8 per cent of self-employed households.

Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, stated that while saving for retirement is a challenge for the majority of people, there are still certain groups that are struggling more than most.

“The self-employed pensions gap is well known - they are not covered by auto-enrolment and many prefer to invest their money in other assets such as property instead,” she said.

“However, there are other key groups also particularly vulnerable to falling behind with their pension savings. The latest barometer data shows only around a fifth of single parents and renters are on track to achieve a moderate income in retirement -way behind their married, mortgaged counterparts.

“It shows anyone deviating from the traditional norms of getting married, buying a house, and working for an employer is going to face challenges when it comes to building up their financial resilience for later life.

“Self-employed people may well have built their wealth elsewhere – in property or other investments – renters and single parents are much less likely to have any such buffer.”

Morrissey warned that renters across the generations are lagging when it comes to pension planning and face the added challenge of either entering retirement still needing to pay off a mortgage as they got one later or having to fund the extra cost of renting through their retirement.

"Single parents are another key group who are struggling to save for retirement thanks to a heady mix of having to shoulder the burden of bills and housing costs, as well as childcare alone,” she continued.

“It is no surprise that once all these costs are paid there is little left over for more long-term planning.

“The cost-of-living crisis is going to make things even harder as the cost of essentials continues to rocket. It looks increasingly likely that more of us are going to have to work longer in future to help balance these financial challenges with saving for retirement.”

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