Renters face a “ticking pensions timebomb” as they head toward retirement with significantly less financial security than homeowners, a study from Barnett Waddingham has revealed.

The firm's At Retirement Reckoning report found that renters had an expected retirement income of £19,000 annually, compared to £21,000 for homeowners.

In addition, the report claimed that homeowners could currently afford more essentials and luxuries and were better positioned for a secure retirement.

It also showed that renters were far less likely to have clear financial goals, with just 12 per cent reporting this, compared to 18 per cent of homeowners.

Indeed, homeowners were utilising a wider range of financial assets to see them through retirement, with a higher percentage of reliance on investments, savings, and private pensions than renters reported.

The report alsorevealed that while the majority (87 per cent) of UK workers had specific retirement goals, including travel, family time, hobbies, and spending time with partners, just 15 per cent had set clear financial goals and budgets.

Barnett Waddingham partner, Paul Leandro, said that with more than a quarter of those working in their 50s and still renting, this cohort was 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, he continued.

“Renters face dual challenges of lower confidence, less engagement with retirement planning, and tangibly worse financial situations.

“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.”

Instead, Leandro argued that policymakers need to create a better framework that allows someone to save tax efficiently for a house deposit and 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,” he concluded.

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