One of the most overlooked assumptions in the UK pension system is the notion that people will reach retirement free of costly housing expenses, and with a tenure that allows them to live securely in their home as long as they need. https://t.co/em9LI9qmxV
— Henry Tapper (@henryhtapper) November 30, 2023
The PLSA retirement living standards do not include housing costs such as the cost of rental (or residual mortgage payments).
The problem is bad today and getting worse.
Graphic courtesy of Neil Walsh of Prospect Union
According to PPI analysis, if patterns of home ownership among today’s 45-64 year olds were to persist through to retirement and all other factors were to remain equal, by 2041:
• The proportion of households who own their own home in retirement could fall from 78% to 63%, the proportion
living in the private rental sector could rise from 6% to 17%, and the proportion in social housing would remain
unchanged.
• The number of households renting in retirement could rise to 3.6 million, of whom 1.7 million would live in the
private rented sector, around 1.2 million more than today.
For anyone familiar with the insecurity of tenure of private rentals, this presents more than a cashflow issue, it suggests that “generation rent” who we currently consider the robust younger workers, is likely to extend to older folk.
• Very few renters would have adequate savings to cover both the cost of renting and cost of living through later life. A couple aged 45-64 today on median income may need to double their total assets or more if they are to privately rent even a one-bedroom flat outside London through later life.
Of course , many of these renters will be paying rent out of a drawdown from a DC pot and not with the security of a wage in retirement. This is a double handful of worry.
• As many as 400,000 more households could become dependent upon income-related pensioner benefits, at a time when renewed concerns over the sustainability of the benefit system, including the freezing of the Local Housing Allowance, are prompting uncertainty over the extent to which the State might intervene to support people with living costs through later life.
Pension Credit (the door to more) is increasingly being gamified, this social media advert from Gov.UK shows that pensioners need to be on the ball.
The problem is very much one of resourcing to local authorities. The trend of local authorities to declare themselves bankrupt continues. This impecunity means many are having to find ways not to pay housing allowance.
• Rates of relative and absolute poverty among pensioners could rise by 2%, and an additional 170,000 households
outside London could be precluded from meeting minimum living standard targets in retirement, of whom more
than two thirds live on their own.
This despite a view that the boomers will be “ok”
• Although there is some geographic variation in the scale of the problems, trends towards higher levels of private
renting among households aged 45-64 are consistent across the country. The changes largely impact impact low to-middle-income households, those already at greatest risk of wealth inequality and poor retirement outcomes.
Making this a social calamity for decades to come.
