People who pay rent in retirement are "substantially" less likely to achieve the minimum standard of living in retirement, according to an analysis by Hymans Robertson.

The firm calculated the chance of various members achieving different levels of retirement income under the Pensions and Lifetime Savings Association's (PLSA) recently revised Retirement Living Standards (RLS).

It found that paying rent in retirement halved someone's chances of achieving the minimum standard.

The PLSA's retirement income levels cover three different RLS: minimum (£13,400), moderate (£31,700), and comfortable (£43,900).

In June, the PLSA updated the RLS, revealing that the cost of the minimum retirement lifestyle has decreased, while the costs associated with moderate and comfortable lifestyles have increased.

Hymans Robertson suggested that helping people purchase a property while saving for retirement, using pension savings as collateral, could help reduce the rent burden in retirement.

Indeed, the consultancy urged the industry and government to "think creatively" about how retirement savings could include getting on the property ladder and removing the need for housing costs in later life.

Commenting on the findings, Hymans Robertson head of defined contribution (DC) corporate consulting, Hannah English, said it showed how big a difference paying for housing makes in dictating an individual's quality of life in retirement.

"To drop from an almost guaranteed (98 per cent) chance to a 43 per cent likelihood of achieving the minimum standard is a huge drop that should not be understated," she added.

As a result, English proposed that pension savings should be used as collateral for mortgages, for first-time buyers only.

"This arrangement would let people get on the housing ladder without a deposit and benefit from lower interest rates as lenders take on less risk of negative equity," she argued.

"Crucially, the money in the pension would still be invested – just in property rather than in bonds or equities," explained English.

"Alongside the investment, the likelihood of someone being laden with paying rent throughout retirement is reduced as they could have paid off their mortgage by the time they retire."

However, English noted that a lack of affordable housing needed to be addressed for the proposal to work.

"It's for this reason that we welcomed the government's £39bn commitment to social and affordable housing over the next ten years in the recent Spending Review," she said.

"We hope this will move the dial in fixing the supply-side problem of getting more people on the housing ladder, as it would significantly improve their chances of reaching the
PLSA's minimum standard of living in retirement," concluded English.

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