Retirees who rent their homes need an extra £419,000 in pension savings to meet housing costs over a 20-year retirement, according to Standard Life.
The financial analysis shows that non-homeowning pensioners face a mounting crisis as the total bill for renting in later life reaches nearly £420,000.
A quarter of people aged 60 to 65 are already living in financial poverty, a situation set to worsen as rising rental prices hit older households. The required additional pension pot has risen by £21,000 from £398,000 last year.
Standard Life, a prominent Edinburgh-based life insurance and pensions provider in the United Kingdom, calculated the figures using rental data from the Office for National Statistics. The official national statistics agency tracks economic and social data across the UK.
The calculations assume annual rental growth of 3.8 per cent over a 20-year retirement period. However, analysts warned that rental costs could climb even faster if the private rented market experiences particularly strong growth.
Rising rental bills for retirees
Monthly rental payments are forecasted to more than double over the next two decades, rising from £1,160 today to £2,350 by 2046.
A worker retiring this year will pay £13,910 in annual rent during their first year of retirement. By the 20th year of their retirement, that annual housing bill will reach £28,250.
Workers who retire in five or ten years will face even higher cumulative costs as rental prices continue to climb.
While 82 per cent of current retirees own their homes, Standard Life found this proportion is expected to fall as rising property prices place homeownership out of reach. The Association of British Insurers, the trade body representing the UK insurance and savings industry, forecasts that one in three retired households could be renting by 2044.
The proportion of households in the United Kingdom renting privately has already doubled over the past two decades, reflecting broad shifts in housing affordability.
Catherine Foot, of the Standard Life Centre for the Future of Retirement, said: "It exposes a fundamental flaw in our current pension system, which is built on the assumption that housing costs fall in later life."
Benchmark standards for living in retirement
Figures from Pensions UK, an industry body that sets widely used benchmark standards for retirement living, show that a single retiree requires £13,900 a year for a basic lifestyle. That figure relies on the assumption that the pensioner owns their home with a paid-off mortgage.
The basic standard allows for £57 a week on groceries, a one-week holiday in the UK, and up to £460 for clothing and shoes, alongside other routine expenses.
Adding rental costs doubles the required annual income for a single pensioner to £27,810 this year, based on Standard Life calculations.
Pensions UK guidelines set moderate and comfortable retirement lifestyles at £32,700 and £45,400 a year respectively. Both benchmarks also assume the retiree owns their home outright.
Pete Cowell, also of Standard Life, said: "For a growing number of people, housing costs could be the single biggest expense they face in later life, adding many thousands of pounds a year to the income needed to maintain a minimum standard of living."
Regional differences in UK retirement rents
In one part of the country, pensioners will need to save almost £860,000 to cover housing expenses in later life.
Retirees in London face the steepest rental bill in the nation, requiring £859,000 over a 20-year retirement. Rents in the capital currently average £28,520 a year and are projected to reach £57,940 by 2046.
Non-homeowners in the South East face the second highest burden at £531,000 over 20 years. Pensioners renting in the East of England will need £480,000, while those in the South West require £462,000.
In Scotland, total rental costs for later life are projected at £382,000. Renters in the West Midlands will need £362,000, followed closely by the North West at £357,000.
Pensioners in the East Midlands require £342,000, while those in Northern Ireland need £329,000. The lowest regional costs were found in Yorkshire and the Humber at £321,000, Wales at £313,000, and the North East at £291,000.
Financial strategies for non-homeowning savers
Cowell recommended that savers plan ahead for retirement rental costs using cash savings, other investments, or annuities. Standard Life highlighted that seeking advice from a qualified financial adviser specializing in retirement can ensure pension pots last and generate maximum tax-efficient income while reducing potential inheritance tax liabilities.
Savers approaching retirement can take immediate action to bolster their pots, including searching for lost pensions. Workers can contact past employers or use free tracing applications such as Gretel. An estimated £31.1 billion currently sits in unclaimed or inactive UK pension pots.
Deferring retirement is another strategy to increase income. Under the UK state pension system, payments are uplifted by 2.5 per cent for each year an individual delays claiming past their state pension age.
Savers can also review their pension investments, as default funds often take a conservative or low-risk approach. Those willing to accept more risk near retirement might consider switching funds, or opting for inflation-linked annuities to secure guaranteed rent payments rather than risking pot exhaustion in drawdown accounts.
Younger buyers aiming to get onto the property ladder can utilize the Lifetime ISA scheme, a UK government savings vehicle that provides a 25 per cent bonus on annual contributions of up to £4,000.
