In retirement, are you able to afford rent?

Although renting in retirement can provide more flexibility, it has certain disadvantages and may be too expensive for the majority of pensioners

One of the most important choices you will have to make when planning your retirement is your residential status. Specifically, will you live in your own house during your golden years or rent?

The latter is not an affordable choice. According to recent research from retirement expert Standard Life, renting in retirement will now cost an average of 419,000 because rents are predicted to more than double over the next 20 years.

Rents are currently 1,160 on average, according to data from the Office for National Statistics (ONS), but if they continue to rise by an average of 3.8 percent annually, they could reach 2,350 by 2046, according to the study.

Due to the high cost, people who intend to rent into retirement must make sure their pension funds allow them to do so.

Watch the entire video here. However, according to ONS data, the average pension wealth for a person between the ages of 65 and 74 was only £145,900 in 2022much less than the cost of rent over a 20-year retirement.

Pensioners who do not own a home and intend to rent when they retire run the risk of not having enough money to cover their housing expenses.

Standard Life's head of annuities, Pete Cowell, stated: "For an increasing number of people, housing costs may be the single largest expense they encounter in later life, adding thousands of pounds annually to the income required to maintain a minimum standard of living."

"Many retirees will still need to make long-term plans for how ongoing housing costs will be covered, even though assistance is available for those with the lowest incomes."

Nowadays, more retirees are renting, despite the cost. According to data from the government's Pensions Commission, over the past 20 years, the percentage of households renting privately in retirement has more than doubled.

"Planning how those costs will be met is likely to become one of the most important financial decisions people make as renting in later life becomes more common," Cowell continued.

"Having a clear plan for covering those expenses can significantly improve long-term financial security, whether through savings, guarantyd retirement income products, or a combination of both."

The real cost of renting where you live in retirement.

If you intend to rent during your retirement, you should carefully review your pension fund and determine whether you can afford to do so in your current location because prices vary greatly throughout the United Kingdom.

With an average annual rent of 28,520, London is the most costly place for retirees to live.

After accounting for rental price growth, that comes out to 859,000 over the course of a typical 20-year retirement.

The South East has the second-highest expected rental cost, with an average annual rent of 17,610 or 531,000 over a 20-year period. This is significantly less than the price in the capital, but it is still significantly higher than in less expensive parts of the UK.

Similar to home prices, rental costs are significantly lower in the North of England and the devolved nations than in the South.

The North East of England is the most affordable area to rent in retirement, with an average annual rent of 9,670. This comes to 291,000 over a 20-year period.

Yorkshire and the Humber, with an average annual rent of 10,650 or 321,000 over a 20-year retirement, is the second-cheapest region.

The estimated cost of rent during a 20-year retirement is displayed on the interactive map below.

Should you rent when you're retired?

Even though renting in retirement can be costly, there are some advantages to renting as opposed to home ownership.

According to Helen Morrissey, head of retirement analysis at wealth manager Hargreaves Lansdown, "if you decide to rent, then you have the flexibility to move around without the burden of having to sell a home."

This could allow you to be nearer to your loved ones, or you might decide to relocate to a less expensive area of the nation or one that better suits your way of life.

The landlord will also be in charge of some maintenance issues with the house you rent, so you won't have to pay for things like a leaky roof.

Additionally, renting may be a more flexible solution and, depending on where you live, a less expensive choice if you do not anticipate paying off your mortgage before the end of your retirement.

Of course, there are disadvantages, the primary one being that your landlord owns the house you rent, so you have no final say over what happens to it.

In the worst situation, you might be kicked out of your house, but the new Renters Rights Act makes it much harder for landlords to do that.

Instead, you won't have to worry about getting evicted or getting permission to make changes to your property if you are the homeowner. After your mortgage is paid off, your monthly expenses will also be significantly reduced, giving you more money each month.

Morrissey stated, "Having your own home when you retire means your daily expenses will probably be lower." If necessary, you can also use your house to release funds through downsizing or equity release."

In the end, your lifestyle, whether you already own a home, and whether you can afford it with your pension will determine whether you should rent in retirement.