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Faced with unaffordable rents and inadequate pensions, 'generation rent' are facing a “ticking time bomb” in retirement, according to a report from the International Longevity Centre (ILC), commissioned by Brightwell.
The study found that older people could be "squeezed out" of their towns and cities and prevented from accessing essential services, noting that, while in 2007 62 per cent of people aged 35 to 44 had a mortgage, by 2017, this had fallen to 50 per cent.
As a result, the proportion of people aged 65 and over living in the private rented sector is predicted to double to 13 per cent by 2040.
However, the ILC noted that the full state pension - currently £11,500 - would "barely" cover the average rent for a two-bedroom property in England, which was £11,200 per year in 2023.
Furthermore, someone still renting through 20 years of retirement could expect to need an additional £317,000 on average across England, while someone renting in London would need at least £633,220 to cover their rent over the next two decades.
This means that future generations of pensioners are “more likely” to be renters than homeowners, according to ILC’s chief executive, David Sinclair.
“At the same time, more of us will be living alone, and poverty in old age is likely to increase,” he said.
A shift from defined benefit (DB) to defined contribution (DC) pension schemes has also been seen, as the ILC noted that, in 2023, 14 million people were saving into DC workplace pension schemes, while just 736,500 people were enrolled in more generous DB schemes.
Brightwell’s CEO, Morten Nilsson, argued that pensioners with only DC savings are facing a “ticking time bomb, with “growing inequality” in retirement.
“It’s important that this inequality is acknowledged,” he said, “and that pension policy reflects this changing reality.”
The report encouraged the government to set out a plan for increasing default contribution rates into workplace pensions, including a clear roadmap for when and how contribution rates will be increased.
It also encouraged the government to widen access to those not covered by the current arrangements, such as the self-employed.
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