Renters and Retirement - An Analyst’s Perspective

The Hargreaves Lansdown Savings and Resilience Barometer - which looks at national resilience on debts, savings, investing and planning for later life - shows 42.6 per cent of households are on track to achieve a moderate level of income in retirement. 

But there are some groups especially vulnerable to under-saving for retirement. For example, only 20.2 per cent of renter households were on track for a moderate retirement compared to 58.7 per cent of homeowners.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, writes: “Saving for retirement is a challenge for most of us but there are certain groups who are struggling more than most, namely the self-employed, single parents and renters. 

“The self-employed pensions gap is well known - they are not covered by auto-enrolment and many prefer to invest their money in other assets such as property instead. The prospect of putting money away that can’t be accessed until the age of 55 might prove too inflexible for someone managing income volatility - getting more saving into pensions will be a tough nut to crack.

“However, there are other key groups also particularly vulnerable to falling behind with their pension savings.  The latest barometer data shows only around a fifth of single parents and renters are on track to achieve a moderate income in retirement - way behind their married, mortgaged counterparts.  

“It shows anyone deviating from the traditional norms of getting married, buying a house, and working for an employer is going to face challenges when it comes to building up their financial resilience for later life. Self-employed people may well have built their wealth elsewhere – in property or other investments – renters and single parents are much less likely to have any such buffer.

“The idea of people entering retirement having paid off their mortgage is shifting. People are getting on the property ladder much later, or not getting on it at all. This all has a huge impact on their wider financial planning including pensions.

“Renters across the generations from generation Z to the baby boomers are all lagging when it comes to pension planning and they face the added challenge of having to either enter retirement still needing to pay off a mortgage because they got one late or having to fund the extra cost of renting throughout their retirement years. It is an enormous challenge that will force many people to work longer in a bid to meet these costs.

“Single parents are another key group who are struggling to save for retirement thanks to a heady mix of having to shoulder the burden of bills and housing costs, as well as childcare alone. It is no surprise that once all these costs are paid there is little left over for more long-term planning.

“The cost-of-living crisis is going to make things even harder as the cost of essentials continues to rocket. It looks increasingly likely that more of us are going to have to work longer in future to help balance these financial challenges with saving for retirement.”

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