'Pension mountain' needed by older tenants

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Tenants who will still be paying rent when they retire will need a pension pot of up to £445,000 to avoid falling living standards, research suggests.

The calculations come from analysis by pension provider Royal London which said savers needed a "pension mountain" for older age.

It comes after the BBC reported concerns among the growing number of middle-age private tenants in the UK.

Many said they faced the prospect of working longer to pay their rent.

Analysis from Royal London has suggested that "as a broad rule of thumb", people whose combined pension income equates to around two-thirds of their gross wages before they retire, should not see a major change in their standard of living when they stop earning.

As a result, the report concluded that an average earner now needed a retirement pot of around £260,000 to avoid a fall in living standards when they retired.

Low interest rates mean this is a much higher figure than it was in 2002, but slightly less than a 2017 peak of £290,000 owing to a recent improvement in rates for annuities - financial products that provide a retirement income.

This assumes people will stop work at 65, that they will use their pension pot to buy an annuity, that they will also have a full state pension to top up their savings, and that they will have paid off their mortgage.

However, the figure rises sharply to as high as £445,000 for non-homeowners who are still having to pay rent to a private landlord during their retirement.

Helen Morrissey from Royal London said: "If our retirement pot is going to support us through a longer retirement and in an era of lower interest rates, we are going to need to build a much bigger pot than in the past.

"More worrying still, we can no longer assume that we will be mortgage-free homeowners in retirement. For those unable to get on the property ladder during their working life, a large private rental bill needs to be factored in to retirement planning."

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