A quarter of renters are unlikely to achieve a basic income in retirement, according to new research.
Government data has revealed the massive wealth discrepancies between homeowners and renters in the UK.
According to the findings, a quarter of renters are unlikely to meet even the PLSA’s definition of a minimum income threshold of £12,800 per year in retirement – more than three times the proportion of UK homeowners.
The discrepancy is considerably bigger when it comes to obtaining a moderate income criterion (£23,300), with 71 per cent of renters unlikely to achieve this level compared to 45 per cent of homeowners.
Additionally, a greater proportion, 14 per cent, of those approaching state pension age this decade are unlikely to fulfil the minimal income criterion than any prior cohort.
Broadstone Head of DC Workplace Savings Damon Hopkins says: “Despite the vast increase to pension scheme membership which is now nigh-on ubiquitous among employed workers in the UK, more needs to be done to ensure many groups are saving sufficiently ahead of retirement,” he said.
“The gap between homeowners and renters is a stark reminder of the wider financial benefits that homeownership can bring, as well as the difficulties that those struggling to get on the housing ladder face.
“With many renters trying to save up to get on the housing ladder while paying rental prices that have surged since the pandemic, it is unsurprising that pension contributions may slip further down the order of priority.
“The cultural and financial importance placed on property ownership has not only boosted prices further but meant that for many people other financial goals are compromised. It clearly points to the improvements needed in the auto-enrolment system which go beyond the homeowner versus renter dichotomy.
“Average DC savings rates are likely to fall well short of ensuring many people live the comfortable retirement that, in many cases, they expect.
“The Government’s proposals to extend auto-enrolment rules by reducing the minimum age to 18 and removing the lower earnings limit are small steps in the right direction but mandating higher pension contributions has to be an urgent priority.
“We also need better governance around investment strategies to ensure that the hard-earned money people are putting into pensions is performing for their later-life. Other initiatives like improving financial education (in all aspects of society i.e. school, work, social media etc) will further help people recognise the importance of accumulating adequate later-life savings.”