An increase in renting could see future pensioners struggle to achieve an adequate standard of living, as the number of pensioners renting looks set to double by 2046, the Pensions Policy Institute (PPI) has warned.

The PPI published its research paper, To Buy or not to Buy: the Changing Landscape of Housing in Retirement, in conjunction with Scottish Widows, exploring the implications of the changing housing market on future retirement needs.

Based on current trends, the report predicted that the percentage of those in the private rental sector at retirement age could more than double to 12 per cent by 2046, due mainly to changes in patterns of home ownership, with fewer people buying homes.

The institute found that this rise in the number of older people renting in retirement could see a subsequent increase in housing benefit claims of as much as 16 per cent by 2034, representing a £6.6bn annual cost.

It also stipulated that where pensioners are homeowners, it is likely that they will still be paying off their mortgages throughout retirement, as the number of life-long mortgages is growing.

Estimating a rise in rental costs of around 3 per cent per annum over the next few decades, the research predicted that rental costs are likely to rise faster than average pensioner income, with fewer future pensioners having access to a defined benefit (DB) income.

This is likely to see rental fees take up a greater proportion of pensioners’ income, making private rented accommodation less affordable in retirement over time.

PPI also noted that affordability of the rental market in retirement was not the only concern though, with the amount of time spent renting likely to impact upon an individuals ability to save or make additional contributions to a workplace pension.

This also follows recent research by The Investing and Savings Alliance (Tisa), which revealed that lifetime renters are expected to exhaust their pension savings 12 years before homeowners.

Renting privately was found to be particularly difficult for pensioners in London, where renting costs are at their highest, but average pensioner income is at its lowest.

PPI senior policy researcher, Mark Baker, commented: “People are finding it harder to get on to the property ladder, meaning that a growing number of people may enter retirement with no property equity at all, and will face the extra costs associated with renting their homes.

"Those who do buy are also more likely to reach retirement with some level of mortgage debt. This means that in the future, people will enter retirement with less security and equity in housing, on average.”

The message was echoed by recentanalysis from Key, which revealed that one in three expect to enter retirement in debt, with 14 per cent having an outstanding mortgage to consider.

Baker continued: "Cheaper housing or higher private pension could help renters, though under current trends, people are not saving enough into pensions and there is insufficient social housing to meet everyone’s needs.

“There is no one-size fits all approach to helping people achieve a higher standard of living, and the report identifies a number of ways in which homeowners and renters can be supported to achieve greater adequacy in terms of their retirement income.

“People who own their own homes in retirement may also need support to save more into a workplace pension in order to achieve a standard of living in retirement that meets their expectations. Others may benefit from being able to use financial products that encourage saving for a mortgage during their working lives.

“The report represents a challenge to industry and government to support people to negotiate the housing market successfully in order to help them achieve higher standards of living in retirement.”

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