Many retired homeowners are getting off the property ladder to join the 25% of retirees who already rent, according to new research by Prudential.
42% of these retired renters are former homeowners who, for various reasons, have made the decision to sell up.
The research found that retired people’s decision to sell their property and move into rented accommodation was mainly driven by financial reasons. 40% were forced to sell their homes to pay off debts, 19% needed to release funds in order to cover the cost of a divorce or separation, and 9% sold their home so they could use the money to boost their retirement income.
But the Prudential study also shows that moving into rented accommodation comes at a cost. Retired renters pay an average rent of £423 a month – two-thirds more than the average mortgage repayment paid by retirees who still have home loans, of £257 a month.
For someone retiring in 2013 and paying the average rent, the annual cost of putting a roof over their head will account for nearly a third of the average expected retirement income of £15,3002 a year (as measured by Prudential’s Class of 2013 research study).
Stan Russell (pictured), retirement spokesperson at Prudential, said: “Renting in retirement can make financial sense and accessing property wealth to boost retirement income is a genuine solution for many. Our research shows that many retired renters are perfectly happy with this arrangement.
“However, retirees should be aware of the extra financial burden they could be taking on if they choose to sell up and rent. I would urge everyone in the run up to retirement to speak with a financial adviser to help them plan and save for the income they’ll need to cover their costs when they stop working.
“The fact that some retirees say they are being forced to sell up purely by the need to pay off debts is concerning and suggests they are not receiving professional advice.”
15% of retired renters choose not to own their home as a lifestyle choice, while 35% rent because they don’t have enough money for a deposit to buy a property and 41% cannot afford home ownership. 58% of retired renters have never owned a home and 73% of them plan to continue renting for the foreseeable future.
Aside from personal financial reasons, many former homeowners decided to sell their home and rent to help their children financially. 7% used some money from the sale of their property to help their children get onto the property ladder, while 9% used the money to help support their children in other ways.