The number of pensioner households renting privately could more than triple over the next 20 years, meaning one in three pensioners may be renters by 2044 – an increase of 1.3 million people.

Research by the Pension Policy Institute finds that nearly 2 million more people are expected to retire without owning their home. It explains that the current pension system has been built on the assumption that people will retire without housing costs. However, its analysis shows that renters face much higher costs in retirement than those who own their home outright.

Renting a two-bedroom home privately costs £200,000 - £400,000 throughout a person’s retirement. In comparison, the average person’s defined contribution pension pot is £154,000, falling to £105,000 for women. This means that rental costs threaten to swallow their entire private savings, and the state pension would need to cover all other expenses.  

Poverty

The most recent pensioner poverty statistics indicate that pensioners who rent - particularly in the private sector - face significantly higher risks of poverty than homeowners. About 35% of private renters and 34% of social renters are in poverty, compared to just 12% of owner-occupiers, according to the findings. Even when receiving the full new state pension, single pensioners in rented accommodation may still struggle to meet basic living costs.

Renting in later life leaves pensioners with higher and more unstable housing costs than homeowners, it explains. While a significant intergenerational wealth transfer is underway, inheritance and gifting as routes into homeownership – and subsequently more secure retirement - are unreliable, unpredictable, and inequitable.

The institute suggests that a set of targeted reforms is needed, including higher contributions, means-tested benefits that account for household circumstances, and housing policy updates. “Closing the gap between what renters have saved, and what they need for secure housing in retirement, requires policy levers that address both housing costs and the pension pot sizes needed to fund them. For many, this will also include additional state support through housing benefit.”

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