How Much? Another £400k needed to rent in retirement

People who expect to rent throughout their retirement could need an additional £391,000 in savings compared to those who have paid off their mortgage, according to Standard Life.

Office for National Statistics figures show the average monthly rent in the UK is currently £1,246, and the average annual rent increase since 2016 is 2.5%. 

The analysis projected these costs forward from state pension age to average life expectancy and found significant regional variances with the total sums required ranging from £660 for the North East and £2,060 for London in year one. 

By the end of the 20-year period, the same cost will be £1,060 for the North East and £3,290 for London. 

In reality, year by year rental increases will vary subject to factors including inflation and interest rates, however these figures give an indication.

The Pensions and Lifetime Savings Association recommends that pensioner couples need a minimum of £22,400 a year in retirement to cover essential needs and some discretionary spending, but this excludes housing costs. 

This means renters could find that they require total savings of £839,000 per household over the course of 20 years in retirement4 - an 87% increase compared to those who are rent and mortgage-free, who would require a smaller amount of £448,000.

This analysis comes as the average cost of buying a UK property hit £375,000 in May and mortgage rates remain higher.

A spokesperson for Standard Life says: “For those who don’t eventually buy, these figures highlight the likely additional savings to be factored into budgeting, which is unlikely to be achieved through contributing the minimum amounts to a pension. This will have knock on consequences for how people manage their retirement income too, as people look to find ways to secure their fixed rental costs, which could be through annuitising in tranches, an inflation-linked annuity, or other means.

“An individual’s housing status is very important in retirement planning, but for many, consideration will need to be given to the trade-offs between saving for retirement and getting on the housing ladder. Whatever your housing position, it’s important to be thinking about how pensions and property work together as you plan for your retirement, and there’s a clear role for pension providers to play in offering tools and resources to help people access the property ladder at different stages in their journey to and through retirement, alongside their retirement savings.”