More than six million people who expect to pay housing costs in retirement don't know how they'll afford them, according to the latest research from Royal London. The research found that around one in three UK adults (34%), equivalent to 18.7 million people, either expect to pay housing costs in retirement or are already doing so. Four in ten (39%) of the approximately 16 million UK adults who expect to pay housing costs say they don't know how they'll pay their rent or mortgage once they stop working.
Renters face the biggest challenge, but almost four in ten mortgage borrowers won’t be mortgage free when they retire. Six in ten renters (61%) expect to have housing costs in retirement, compared with 37% of mortgage borrowers. Nearly half of renters (45%) believe they'll still be paying rent for more than 10 years after they retire, while just 7% of mortgage holders expect to be making mortgage payments for that long.
The findings come as rising housing costs and longer mortgage terms mean more people are likely to enter retirement still paying for a roof over their head. Younger adults are particularly affected. More than four in ten (44%) people aged 18 to 34 expect to have housing costs in retirement, compared with 24% of those aged 50 to 69. On average, homebuyers aged 18 to 34 have an original mortgage term of 31 years, and 43% took out a mortgage with an original term of 35 years or longer. By comparison, just 2% of retirees originally took out their mortgage for a term of 35 years or more.
Housing costs could put additional pressure on retirement incomes
The research highlights how broader financial circumstances, including housing costs and income levels, can influence people's ability to save for retirement and build long-term financial resilience. Those who expect to pay housing costs in retirement have an average pension pot of £34,948, compared with £120,682 among those who don't. The average pension savings figure across all respondents was £93,221.
People struggling financially are also more likely to face housing costs in later life. Nearly six in ten (59%) people who describe themselves as being in financial crisis expect to pay rent or mortgage costs in retirement, compared with just 11% of those who say they are financially comfortable.
Regional differences
The likelihood of paying housing costs in retirement varies across the country. People living in London, the South East, and the South of England, are among the most likely to expect housing costs in retirement, with 34% saying they expect to still be paying rent or a mortgage after they retire. This compares with 23% in Yorkshire and the Humber. Meanwhile, more than half (53%) of people in the North East of England who expect to have housing costs in retirement say they don't know how they will pay them, significantly higher than the UK average of 39%.
Sarah Pennells, Consumer Finance Specialist at Royal London, said: "For generations, reaching retirement often meant reaching the point where housing costs were behind you. But for millions of today's retirees and future retirees, that simply isn't the reality. Whether it's renting for longer, taking out larger mortgages or stretching repayments over decades, more people are approaching retirement still facing significant housing costs. What's particularly worrying is that over six million people who expect to pay rent or mortgage costs in retirement don't know how they'll cover those payments. If you're heading towards retirement and expect to have housing costs, it's important to factor these into your retirement planning as early as possible.
"Housing costs can make a huge difference to how far retirement income will stretch. Understanding what your housing costs could look like in later life can help you develop a more realistic picture of the income you'll need in retirement."
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