Scottish Widows warns: Soaring UK house prices pose "significant challenge"

According to a report by Scottish Widows, a major pension provider in the UK, over the past 20 years, the average house price in the UK has more than doubled, while annual rent 20 years ago was approximately one-fifth of what it is now. Researchers say that inflation has eroded people's purchasing power, meaning that the purchasing power of one pound is now only slightly more than half (53%) of what it was when Scottish Widows first published a report in 2005. In 2005, the average house price was 123,815, while in 2024, the average house price was 285,000, an increase of 130%. However, researchers found that rents have increased at a much faster rate. In 2005, the average annual rent was 2,889, but since then, rents have soared to 14,676, five times the annual rent in 2005. Scottish Widows stated that as wage growth lags behind the rising cost of living, this presents a challenge for people when considering saving for retirement. The study found that since 2005, the average annual income for full-time employees has increased by around 53%. People are also retiring later. Scottish Widows reported that in 2005, the average age of retirement for men was just over 64, and for women it was just over 61, but since then, the average retirement age for men has increased to 65 and for women it is around 64. The research by Scottish Widows showed that 54% of people expect to work at least 7 years longer than they hoped for. Over the past 20 years, there have been significant changes in pension schemes, including the introduction of automatic enrollment in occupational pension schemes and increasing freedom and flexibility for individuals aged 55 and over to access their pension savings. The research showed that compared to 2007, there are slightly more people now feeling optimistic about their retirement prospects. In 2007, 31% of people felt optimistic or very optimistic about their retirement life, whereas in the latest report, this proportion is 35%. Scottish Widows used multiple sources of data, including data from the UK Office for National Statistics (ONS), for their calculations. Pete Glancy, Head of Pension Policy at Scottish Widows, said: "There have been significant changes in retirement policy since we first published our report in the summer of 2005." "In the early 2010s, a series of pension acts were passed to set out a timetable for increasing the age at which people can claim the state pension, with the age increasing from 65 to 66 in 2019, and plans to increase it to 67 and 68 in 2028 and 2046 respectively." "In the autumn of 2012, the UK introduced measures to automatically enroll employees in occupational pension schemes, which was a milestone breakthrough for the industry and greatly increased participation." But he added: "It cannot be denied that the past 20 years have been challenging for many people. The financial crisis, global pandemic, soaring prices, and astonishing house price increases have all presented significant challenges to people of all ages in their everyday lives." "These events undoubtedly impact people's ability to consider retirement savings. Policymakers and the pension industry should bear this in mind when thinking about how to improve retirement lifestyles for the next 20 years."