One in three pensioner households could be renting by 2044.

Research by the Association of British Insurers finds that nearly two million more people are expected to retire without owning their home, marking a major shift in how future generations will experience retirement.  

Most of this growth will come from private renters, where the number of pensioners renting is projected to more than triple over the next twenty years, increasing by 1.3m people. 

The research, commissioned by the ABI and conducted by the Pensions Policy Institute, considers how rising housing costs, combined with low pension savings and changing household composition, could leave millions struggling to maintain living standards in later life. 

Today’s pension system has been built on the assumption that people will retire without housing costs. 

However, this analysis shows that a generational shift in homeownership means many will need to save more to cover expenses.  

The insurers’ body insists that private renters face much higher costs in retirement than those who own their home outright. 

The analysis finds renting a two-bedroom home privately costs £200,000 – £400,000 throughout a person’s retirement. In comparison, the average person’s pension pot is £154,000, falling to £105,000 for women. 

This means that rental costs threaten to swallow a person’s entire private savings, and the state pension would need to cover all other expenses.  

There are already indicators of the pressure of housing costs for some older households. 

The report notes that the proportion of flat sharers aged 65 or older has tripled in the last decade, and there has been a 38% increase in over 65s taking in lodgers.

For single-person households, additional housing costs could be even more problematic. 

People living alone face higher living costs because housing and household bills can’t be shared. 

Approximately 30% of UK households are currently single person households, with half of these aged over 65. This trend is set to continue, raising the risk that tomorrow’s pensioners will struggle financially unless saving levels improve.

The impact of living alone can be even more pronounced for women. 

Women’s retirement prospects are more seriously impacted by a breakdown of the household than men’s, with bereavement and divorce often leaving many with substantially weaker retirement finances. 

Divorced women aged 60-64 have an average of just £35,000 in pension savings, which is just over half of married women and under a third of divorced men. 

These figures would be eclipsed by average rental costs.