A survey of 2,000 UK adults found 51 per cent would choose to work for longer to ensure they had paid off their mortgage rather than retire earlier while facing housing costs. By comparison, just nine per cent said they would prefer to retire earlier if doing so meant renting during later life.
Home ownership prioritised over pension savings
The PensionBee research also found outright home ownership was considered more important than building up a large pension pot when people were asked about financial security in retirement. Some 45 per cent identified owning their home outright as the most important factor, compared with 36 per cent who prioritised having a large pension.
The findings highlight the increasingly difficult balance facing people trying to build retirement savings while also meeting mortgage or rental costs.
Concerns over housing costs in retirement
Fewer than one in five people surveyed - 19 per cent - said they were very confident their pension would be sufficient to cover their housing costs during retirement. Another 37 per cent either said they were not confident or had not considered the issue.
Longer mortgage terms also mean some homeowners could still be making repayments as they approach retirement. PensionBee said the average first-time buyer is now aged 32 and takes out a mortgage lasting 31 years, which would take someone following that typical path to the age of 63 before their mortgage was cleared.
A report published by the Pensions Policy Institute earlier this year projected that almost two million more pensioner households could be renting by 2044. It warned that the UK's retirement system has historically operated on an assumption that many people would enter later life without significant housing costs because they owned their homes outright.
'Housing crisis has reshaped how a generation thinks about retirement'
Becky O'Connor, head of pensions at PensionBee, said: "These findings reflect a housing crisis that has reshaped how a generation thinks about retirement. People prioritising homeownership over pension saving might be making a rational financial decision, as owning your home outright removes one of the biggest costs in retirement."
"However, the problem is that rising house prices have made that goal significantly harder to reach, and the consequence for many will be that retirement starts later, or that they arrive at retirement still carrying housing costs they had hoped to have cleared."
"For many, the home ownership goal will continue to evade them and then the question will be can they boost their retirement savings by enough to cover the cost of renting. The difficulty of achieving the twin major life goals of home ownership and decent pension savings has never been so apparent and the prospect that a sizeable proportion of people will not manage to achieve both is something that policymakers cannot ignore."
Balancing mortgage and pension savings
PensionBee said people saving for a home should also consider the long-term effect of reducing or stopping pension contributions. Starting pension contributions early and continuing to save throughout working life can give contributions more time to grow, although investment returns are not guaranteed.
Workplace pension contributions can also include payments from an employer and tax relief, meaning someone who reduces their contributions could lose more than the amount no longer coming from their own pay. The research suggests many people nevertheless see removing housing costs as an important part of preparing financially for retirement.
For those approaching later life with a mortgage or who expect to continue renting, the amount needed to fund retirement could consequently be significantly different from someone who owns their home outright.
