Alice Guy, head of pensions and savings at interactive investor, has warned of the potential crisis facing the UK’s “generation rent,” as they may struggle to afford rental costs in retirement.
Guy acknowledges auto-enrolment as a significant success but points out that pension provisions remain inadequate for many workers, with several groups left behind.
“The state pension is much lower than many other European countries like France, and only enough to provide a very basic retirement income.
“According to the PLSA retirement living standards, it’s possible for couples to survive on the state pension if they are homeowners, but it won’t leave much spare for luxuries or “fun” money. And it also won’t be enough to pay private rental income in retirement,” said Guy.
With the cost-of-living and long-term wage stagnation, workers face difficulties in saving enough for retirement through private or workplace pensions.
The growing trend of private renting exacerbates this issue, as Guy warns, “the risk that generation rent gradually becomes generation skint, unable to fund the costs of renting in retirement.”
The retirement rental crisis is a ticking time bomb, as ONS figures reveal a significant increase in renting among 45- to 54-year-olds and 55- to 64-year-olds compared to just two decades ago.
Guy also emphasises the challenges faced by self-employed workers, who often struggle to save enough for retirement due to precarious incomes and a need for quick access to savings. “A higher state pension age also disproportionately affects self-employed workers, who are often in manual jobs that are just not possible or pose significant risk of injury in your late 60s,” she added.
