Renters and single parents likely to struggle to achieve moderate retirement income

According to Hargreaves Lansdown’s Savings and Resilience Barometer, home renters and single parents are likely to struggle to save enough in their pension for a moderate standard of living in retirement.

It found that only 20.2% of renter households were on track for a moderate retirement income, compared to 58.7% of homeowners.

Meanwhile, only 19.6% of single parents were on track, compared to 48.8% of couples with children.

Pensions and Lifetime Savings Association (PLSA) standards state that a single person would need a retirement income of £20,800 a year for a moderate standard of living, while a couple would need £30,600 .

The self-employed were found to be more likely to be on track for a moderate income in retirement than renters or single parents, although they were still less likely than employed households.

Almost half (49.6%) of employed households were on track for moderate retirement, compared to 27.8% of self-employed households.

Helen Morrissey, principal pensions and retirement analyst at Hargreaves Lansdown, said while saving for retirement is a challenge for the majority of people, some groups struggle even more than most.

“The self-employed pension deficit is well known – they are not covered by self-registration and many prefer to invest their money in other assets such as real estate,” she said.

“However, there are other key groups also particularly vulnerable to having their retirement savings delayed. The latest Barometer data shows that only around a fifth of single parents and renters are on track to reach a moderate to retirement, far behind their married and mortgaged counterparts.

“It shows that anyone who deviates from the traditional norms of getting married, buying a house and working for an employer is going to face challenges when it comes to building their financial resilience for later in life.

“The self-employed may well have built their wealth elsewhere – in real estate or other investments – renters and single parents are far less likely to have such a buffer.”

Morrissey warned that tenants of all generations are falling behind when it comes to retirement planning and face the added challenge of entering retirement still needing to pay off a mortgage because they got one later or having to finance the additional cost of renting during their retirement.

“Single parents are another key group struggling to save for retirement due to a heady mix of having to shoulder the burden of bills and housing costs, as well as childcare on their own,” a- she continued.

“It’s no surprise that once all these costs have been paid, there isn’t much left for longer-term planning.

“The cost of living crisis will make things even more difficult as the cost of basic necessities continues to soar. It seems increasingly likely that more of us will need to work longer in the future to help balance these financial challenges with saving for retirement.