Retirement rental hotspots: why pensioners are still renting
One in four retired people are still paying out a fortune every month in rent. In some parts of the country this rises to as much as three in four pensioners. And the proportion of retired renters is on the increase.
So where are the retirement rental hotspots, and should we be worried about this trend?%VIRTUAL-SkimlinksPromo%
HotspotsResearch from Prudential found that London has the biggest proportion of retired renters by far: overall just over a third of retired Londoners are still paying rent. In Tower Hamlets this rises to a shocking 73%.
Outside the capital, Manchester has the highest proportion of pensioner households that rent, with a near 50-50 split between owning and renting. Kingston upon Hull (47%), Norwich (45%), South Tyneside (42%) and Newcastle upon Tyne (41%) also have high proportions of retired renters.
The top 10 retirement rental hotspots outside LondonManchester 50%
Kingston upon Hull 47%
South Tyneside 42%
Newcastle upon Tyne 41%
Top ten overallTower Hamlets 73%
Hammersmith and Fulham 57%
Kensington & Chelsea 51%
Should we be worried?Traditionally, the aim of many households was to pay off the mortgage by retirement (or finish the job with the lump sum from their pension), so they could automatically live on a lower income in retirement.
Those still paying rent in retirement will spend half the average retirement income of £15,3002 a year on rent - which goes to show what a difference it makes if you own your own home outright by this stage.
Even those repaying the mortgage face lower monthly costs than renters. Prudential found that the average mortgage in this age group is £257 a month, while the average rent is £423 a month.
If you are paying rent it also brings a major area of uncertainty to your monthly budget. This large chunk of your monthly expenses is liable to increase on renewal each year, and leave you subject to the whim of a landlord who could sell the property out from under you at any time.
Why has it happened?A large part of the reason for the trend is the cost. Stan Russell, retirement expert at Prudential, said: "Living in a home you own can be less of a drain on your retirement income than paying rent, however with property prices in many urban areas higher than in other parts of the country, it's no wonder that in cities such as Manchester, Hull, Newcastle, Norwich and Liverpool the number of retired homeowners is only just higher than the number of retired renters."
It is also due in part to financial difficulties in a tough economic climate. The company discovered earlier this year that 42% of retired renters are former home owners who decided to sell up. Some 40% were forced to sell up in order to pay off debts, and 19% were forced by divorce.
Lifestyle?Others have had their hands forced by a shortfall in retirement income. Some 9% have sold their property in order to free up money to live on in retirement. This can work to their advantage. Russell said: "Renting in retirement can make financial sense and accessing property wealth to boost retirement income is a genuine solution for many. Our research shows that many retired renters are perfectly happy with this arrangement."
In fact, 15% of people have turned to renting because they don't want the hassle and cost of running their own home, and want a landlord to deal with problems that arise.
However, Russell warned that they are taking on an extra burden they need to understand very clearly. There has to be a clear calculation of how long the money will last in covering the extra cost of renting - and whether this is storing up problems for later in retirement.
But what do you think? Do you want to rent in retirement? Will you have to?