Pensioners spend £23 bn on rent

Monday, 14, Apr 2008 10:04

Pensioners in the UK are being forced to spend some £23 billion on rent each year, after failing to secure a place on housing ladder during their working life.

As such those pensioners who rent during retirement are £133,117 worse off than their home-owning counterparts, finds research from Friends Provident.

By not making a property purchase during their younger years, renters are entering a trap that becomes increasingly difficult to escape, argues the pensions provider, particularly as their income levels out during retirement.

A consistent drain on retirement income from rental costs means that pensioners could face increasing levels of poverty, especially if rental costs increase dramatically.

"Renting a property can often be a difficult cycle to break out of due to the initial money and deposit needed to purchase a house," explained Jeremy Ward, head of pensions marketing at Friends Provident.

"Renting during retirement creates further difficulties and means that renters need to be more prepared and have a much larger annual income in retirement to keep a roof over their heads.

"In turn this means that renters need to be aware of the extra income required and make provisions for this in their pension planning."

Friends Provident research shows in order to maintain a rental property during retirement a pensioner needs to have an annual income of £11,491 to cover rent, utilities, ground rent and service charges.

In comparison the average home owner needs only £3,020 each year to maintain their property - a difference of £8,471.

On average Britons own their home outright by the age of 48 - meaning the majority of British homeowners have no mortgage to pay during their retirement.

Finally, calculations from Friends Provident show in order to maintain a rental property over 16 years (the average length of retirement) a 23-year-old needs to save 275 per cent more than a home owner, this increases to 291 per cent for someone aged 43.