Renters have a pension problem – only one in five on track for moderate retirement

Helen Morrissey, Head of retirement analysis at Hargreaves Lansdown, comments on their Savings and Retirement Barometer and its data, showing renters have a pension problem – only one in five on track for moderate retirement.

Key points from publication:

• • Only 19% of renters are on track for a moderate retirement compared to 54% of those paying a mortgage.
  • Renters are at a disadvantage across all age groups. Only 26% of Generation Z renters are on track for a moderate retirement compared to 53% of those paying a mortgage.
  • For Generation X this drops to just 17% of renters and 59% of people paying a mortgage.
  • By not getting on the housing ladder people also risk having to pay rent in retirement which pushes up how much they need to save even more.
  • Moderate retirement is as defined by the Pension and Lifetime Savings Association’s Retirement Income Standards.

Helen Morrissey says:

“Renters have a pension problem and lag way behind those paying a mortgage when it comes to pension planning.

“It remains the case regardless of generation – only just over a quarter of Generation Z households who rent are on track for a moderate retirement compared to well over half of those with a mortgage.

“The picture gets grimmer as you get older with just under 17% of Generation X households who rent on track with their retirement planning.

“Soaring house prices mean people are getting on the housing ladder later, and in many cases not at all.

“Those able to get mortgages often get them at much longer terms than the standard 25 years and these trends have long-term impacts across financial planning.

“This means people are increasingly going into retirement without having paid off their mortgage or facing the prospect of having to rent for the rest of their lives.

“These housing costs can add thousands of pounds to someone’s annual budget and mean they have to save far more for retirement than those who have been able to repay their mortgage.

“Younger generations -such as Generation Z and Millennials still have time to catch up with their retirement planning but those getting closer to retirement may find they need to make tough choices around working for longer to get back on track.”

About the HL Savings and Resilience Barometer:

In partnership with Oxford Economics the HL Savings and Resilience Barometer measures the financial resilience of the nation every six months, to see whether we are getting stronger or facing bigger challenges.

The Barometer is unique because instead of looking at specific aspects of our finances in isolation, it draws together seventeen data points from a number of official data sets, across these five pillars to provide a holistic measure of the state of the nation’s personal finances.

It is structured around the five pillars of financial behaviour that we consider fundamental for households to balance current and future demands, while guarding against risks. These are: controlling your debts, protecting your family, saving for a rainy day, planning for later life and investing to make more of your money. 

The aim of our work in this area is to help to promote awareness and understanding, inform the debate, and ultimately help improve the decisions individuals and policymakers make to improve financial resilience.

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay