Pensioners who don't own their home need extra £419,000 saved to cover rent in retirement

Savers who don't own their home could be hurtling towards a pensions crisis as the bill for renting in retirement reaches almost £420,000, This is Money can reveal.A quarter of those aged 60 to 65 are already living in financial poverty, but this is set to get worse in the coming years if increasing numbers need to fork out for rising rental costs, experts warn.Retirees still renting in their golden years now need a staggering £419,000 extra in their pension pots to meet their housing costs compared to those who own their own homes, fresh analysis from Standard Life reveals.This is based on projected rental prices over a 20-year retirement, which were calculated using Office for National Statistics rental data. It assumes rental growth of 3.8 per cent a year.The cost has risen from £398,000 last year, meaning today’s retirees need to find an extra £21,000 for their housing costs.In one part of the country, almost £860,000 is needed for renting in later life. Retirees in London will need to fork out some £859,000 for rent over a 20-year retirementIt means swathes of people are set to plunge into financial difficulty in retirement if they don’t already own a property.Monthly rents could more than double from £1,160 today to £2,350 by 2046, the research shows.If a worker was to retire this year, they would need to pay £13,910 for their annual rent. But by the 20th year of their retirement, they will need to find £28,250, the study forecasts.But retire in five or ten years' time, and the total cost will be higher still as rental prices continue to soar.Plus, rental costs could climb by more than 3.8 per cent a year if the market is particularly strong.The majority of current retirees – some 82 per cent – are homeowners, according to a Standard Life survey, but this number is only expected to dwindle in the coming years as property price tags climb even further out of reach.Renting in retirement is set to become far more common, says Catherine Foot, of the Standard Life Centre for the Future of Retirement.The proportion of households that rent privately has doubled in the past two decades. And one in three retired households could be renting by 2044, according to the Association of British Insurers.Foot adds: ‘It exposes a fundamental flaw in our current pension system, which is built on the assumption that housing costs fall in later life.’Single retirees need £13,900 a year to meet a basic standard of living in later life, according to Pensions UK figures, which are widely used by the industry as the benchmark for costs in retirement.It's enough to spend £57 a week on groceries, a week-long holiday in the UK and up to £460 for clothing and shoes, among other expenses.But this assumes you own your home and have paid off the mortgage. Add in rental costs and the amount needed this year alone will double to £27,810, the Standard life calculations reveal.For moderate and comfortable lifestyles, £32,700 and £45,400 are needed, but these also assume you own your own home.Pete Cowell, also of Standard Life says: ‘For a growing number of people, housing costs could be the single biggest expense they face in later life, adding many thousands of pounds a year to the income needed to maintain a minimum standard of living.’Retirement postcode lotteryPensioners in some parts of the country will need to fork out more than double the £419,000 headline figure for rental costs in retirement.In London, where rents are currently a staggering £28,520 a year, costs will rise to £57,940 by 2046.It means savers need to cough up some £859,000 in total for housing costs. Pensioners in the south east, east of England and the south west who don’t own their own home will need to pay £531,000, £480,000 and £462,000, respectively.Scotland is next with a £382,000 total cost followed by the West Midlands at £362,000 and the North West at £357,000.Those in the East Midlands need to shell out £342,000 while in Northern Ireland it’s £329,000.Places with the cheapest costs are Yorkshire and the Humber, Wales and the North East, at £321,000, £313,000 and £291,000, respectively.What can you do now to prepare for renting in later life?Savers should plan ahead how they will cover the cost, whether through cash savings, other investments or annuities, Cowell adds.If you're fast approaching retirement, you can make some last-minute moves to bolster your savings.First, look for any lost pension pots. Contact former employers to check on those which may be missing or use a free app like Gretel which will do the hard work for you. Some £31.1billion is currently sitting in unclaimed or inactive pension pots, which could make a significant dent in the housing crisis.Delaying retirement is another option, as your state pension payments are uplifted by 2.5 per cent for each year you delay claiming.Reconsider your pension investments, too, as default funds are likely to be conservative or low risk. If you are happy to take on more risk so close to retirement you could consider switching funds.You could also think about inflation-linked annuities to pay your rent, which will provide some certainty on annual payments instead of panicking you will run out of money if your savings are left in a drawdown pot.Young buyers who want to get their foot on the first rung of the property ladder can also take advantage of the Lifetime individual savings account (Lisa), where the government will boost annual savings of up to £4,000 by 25 per cent.SAVE MONEY, MAKE MONEYUp to £250 cashbackUp to £250 cashback2.5% cashback when investing at least £2004.61% cash Isa4.61% cash IsaTrading 212: 1.01% fixed 12-month bonus£200 Sipp cashback£200 Sipp cashbackFund a pension with at least £20,000Up to £150 cashbackUp to £150 cashbackOpen a savings account with at least £5,000Welcome bonusWelcome bonusGet up to £200 when you invest £100Affiliate links: If you take out a product This is Money may earn a commission. 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