Living cost hikes and surging property prices ‘have posed significant challenge’

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The average UK house price has more than doubled over the past two decades, while annual rental prices were around a fifth 20 years ago of what they are today, analysis has found.

Scottish Widows looked at how financial challenges for households have evolved, to mark its 20th annual retirement report, which first launched in 2005.

The impact of inflation on eroding spending power means a pound buys only just over half (53%) of what it could when Scottish Widows launched its first report in 2005, researchers said.

  • 2005 – £123,815
  • 2024 – £285,000

The average house prices in 2005 was £123,815, compared with £285,000 in 2024 – a 130% increase.

But rents have risen at a much faster rate, researchers found.

The average rental property cost £2,889 per year in 2005 but that has since soared to five times the 2005 total, at £14,676.

With wages having lagged behind some rises in living costs, this has brought challenges for people when factoring in saving for later life, Scottish Widows said.

Average annual full-time earnings for employees have increased by around 53% since 2005, the research found.

It can’t be denied that the last 20 years have been tough for many

Pete Glancy, Scottish Widows

People are also retiring later in life. Scottish Widows said that in 2005, men were aged just over 64 on average and women were aged just over 61 typically when they retired – but this has since risen to just over 65 for men and around 64 for women.

Scottish Widows’ research indicates that 54% of people expect to work at least seven years longer than they would like.

Major changes have happened in the pensions system over the past 20 years, including automatic enrolment into workplace pensions and the pension freedoms for over-55s.

Scottish Widows said its research indicates slightly more people feel positive about their retirement prospects than in 2007, when its data on this measure started.

In 2007, 31% of people felt positive or very positive about their retirement, compared with 35% in its recent report.

Scottish Widows used several data sources, including Office for National Statistics (ONS) figures to make its calculations.

Pete Glancy, head of pension policy at Scottish Widows said: “Much has changed policy-wise in the retirement landscape since our first report launched in the summer of 2005.

“A series of Pension Acts in the early 2010s set out the timetable for increasing the age that people are eligible for the state pension, which moved from 65 to 66 in 2019, with further planned increases to 67 and 68 in 2028 and 2046 respectively.

“The autumn of 2012 saw the introduction of automatic enrolment for employees into workplace pension schemes, a landmark breakthrough for the industry which greatly boosted participation numbers.”

But he added: “It can’t be denied that the last 20 years have been tough for many. A financial crisis, global pandemic, the soaring cost-of-living and incredible hikes in property prices all posed significant challenges to the everyday lives of people of all age groups.

“These events undoubtedly impact people’s ability to consider their retirement savings. Policymakers and the pensions industry should bear this in mind as they think about how to improve the next 20 years of retirement lifestyles.”

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