Many people assume that by the time they hit retirement, they’ll own a home and no longer have a mortgage. This isn’t always the case. According to the Centre for Ageing Better, the number of older private renters is at an all-time high. Their report found more retirees are having to cover the cost of rent while living on fixed retirement incomes.
You could be renting a property in retirement for a number of reasons. You may have needed to sell your home earlier in life or you may be choosing to privately rent to enjoy more flexibility over where and how you’d like to live. Whatever your circumstances, here are three ways to navigate renting in retirement.
1. Financial planning
While it might be stating the obvious, the key to a happy retirement is making sure you have sufficient savings. This is even more important for renters who don’t have the option of selling a property to help fund their retirement. Maximising pension contributions during your working years can make a huge difference.
One example of this is consolidating any old pensions into a single plan. This could help reduce the fees you’re paying and improve any investment growth potential as well as opportunity to compound.
If you’re employed, it’s likely you’ll be enrolled into your workplace pension scheme and benefit from employer contributions. Under Auto-Enrolment rules, your employer must pay a minimum of 3% of your qualifying earnings into your pension whilst you must pay 5%. However, some companies have more generous policies and may offer employer matched contributions. If you increase the percentage you’re paying in, some employers will match your contributions (up to a certain limit).
Both full-time and part-time employees can benefit from Auto-Enrolment, but you must:
- work in the UK;
- be at least 22 years old (and not yet State Pension age);
- earn more than £10,000 per year;
- not already be a member of a suitable workplace pension scheme.
If your annual salary is between £6,240 and £10,000 (£833 per month or £192 per week) your employer doesn’t legally have to enrol you (2024/25). However, if you ask to join, your employer can’t refuse - and you’ll qualify for the minimum level of employer contributions. So it’s worth discussing with your HR department.
Make sure you’re taking advantage of tax relief on your private and workplace pension savings. Most UK taxpayers usually get tax relief on their annual contributions up to £60,000 (2024/25) or 100% of your salary, whichever is lower. How much tax relief you get, depends on your earnings. If you’re a basic rate taxpayer it’s a 25% top up, so HMRC adds £25 for every £100 you pay into your pension making it £125. However, higher and additional rate taxpayers can claim further tax relief through their Self-Assessment.
You may also be able to take advantage of the carry forward rule. This allows you to carry forward any unused allowances from the previous three tax years. Before doing so, make sure you understand all the rules around carry forward.
Budgeting is another essential for managing rental costs in retirement. You could start by estimating your future rental expenses, taking into account your desired location and type of housing. Remember to also factor in inflation and any potential rent increases over time. Then create a detailed budget that includes all your living expenses from utilities and groceries to healthcare. This will help you understand how much you need to save.
2. Consider your housing options
Private renting during retirement offers you flexibility without the long-term commitment of homeownership. And, in some cases, maintenance and repairs are the landlord’s responsibility, which can mean less hassle and cost for renters over time. However, there can be downsides to private renting, especially when it comes to long-term security. For example, if your rent increases over time it could outpace your pension income.
One way to counteract any worries of long-term security in private renting is by securing a long-term lease. Alternatively, you could look for properties that specialise in renting to retirees. These properties can offer a more stable and accommodating rental contract.
Exploring social housing and retirement communities can also be beneficial. Social housing can often be more affordable and often comes with support tailored to retirees. While retirement communities can provide a good sense of community, security, and amenities.
3. Don’t forget about benefits and support
If your pension doesn’t quite cover your living costs as a renter, it’s worth looking into any government benefits you might be eligible for. This could be:
- Housing Benefit - a payment to help cover rent payments for low income individuals; or
- Pension Credit - a benefit for low-income retirees.
It’s important to note there are two parts to Pension Credit. The first is Guarantee Credit, which tops up your weekly income. The second is Savings Credit, which is an extra payment for people who have saved some money towards their retirement. These payments can make a massive difference to your financial stability during retirement. Make sure you visit gov.uk to understand the criteria before applying.
It’s also worth speaking to your local council, some of which offer support to retirees seeking suitable housing in the UK. This can include financial assistance, housing advice and emergency housing options. Many local councils also offer specific programs aimed at older adults. For example, grants for home modifications to improve accessibility or energy efficiency.
And finally, consider reaching out to charities and non-profit organisations. Charities like Age UK can offer support by finding suitable accommodation or helping you to understand your rights as a tenant. These resources can be invaluable for navigating the rental market as a retiree.
Renting isn’t a compromise
While there are a number of considerations, there are also several benefits to choosing to rent in retirement. From allowing you more freedom and flexibility to providing a like-minded community and support.
While renting doesn’t mean compromising on security or quality of life, it’s crucial to plan ahead to allow you the financial freedom to make the most of your retirement years. Make sure you do your research and understand what support is available to you.
Lee Bell is a freelance Journalist and Copywriter specialising in B2B/consumer technology, specifically AI, health and lifestyle. Sponsored by the Journalism Diversity Fund in 2009 to complete an NCTJ diploma, Lee has over 15 years of writing and editing experience. You’ll find his words in the likes of The Metro, The Sun, Men’s Fitness, Stuff Magazine and T3.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
