Renters risk sleepwalking into retirement crisis amid ‘looming’ pension problem

Renters are “much less” likely to be on track to have a 'moderate' income in retirement than homeowners across all age groups, according to new findings from Hargreaves Lansdown.

Hargreaves Lansdown’s Savings and Resilience Barometer found that 56.4 per cent of Generation Z homeowners were well-placed to receive a moderate income in retirement compared to 15.5 per cent of renters.

This trend was repeated across all age groups, with 57.9 per cent of Millennial homeowners on track compared to 17.1 per cent of renters and 52.2 per cent of Generation X homeowners on track compared to 17 per cent of renters.

The gap in the Baby Boomer group was less severe, although only 35.6 per cent of homeowners were due a moderate income in retirement compared to 13.3 per cent of renters.

Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrisey, offered an explanation for the barometer’s findings: “One potential explanation is that those who manage to become homeowners are better at planning their money in the first place so are more likely to make retirement provision.

“However, it could also be that the cost of saving for a deposit leaves no room to save for anything else or it deters people from even trying in the first place.

“We also can’t discount the huge impact of the bank of mum and dad. Recent research from Savills showed parents helped almost half of all first-time home purchases in 2021.

“Either way it is a grim picture for renters who face retirement with little pension and no home if they don’t have parents who can help them.”

Hargreaves Lansdown also found that people in a couple were more likely to on track for a moderate income in retirement than those who are single, both as homeowners and renters.

Over half (56.9 per cent) of homeowning couples and 17.8 per cent of renting couples were found to be on track for a moderate income in retirement, compared to 49.4 per cent of homeowning singles and 15.2 per cent of renting singles.

Morrisey continued: “Renters have a huge looming pension problem and risk sleepwalking into a retirement crisis.

“Across all generational groups, renters trail their home-owning peers when it comes to being on track to achieve a moderate retirement income.

“Even those who rent with their partner are significantly less likely to be on course with their pension planning than those couples who own their own home.”

These findings come from the Hargreaves Lansdown Savings and Resilience Barometer which measures the financial resilience of the nation every six months and draws together 17 data points from a number of official data sets across five pillars to provide a 'holistic' measure of the state of the nation’s personal finances.

A ‘moderate’ retirement income was as defined by the Pensions and Lifetime Savings Association at £20,800 a year for a single person and £30,600 per year for a couple.

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