LIZ ROWLINSON: Why older people are now RENTING luxury developments instead of downsizing – and what it means for their children’s hopes of inheriting…

For Colin and Jennifer Ancliffe, the long drawn-out experience of selling the five-bedroom family home where they’d lived for 50 happy years was sufficiently traumatic to persuade the couple, both 82, not to buy and risk putting themselves – or their loved ones – through it ever again. Instead, they opted to rent.

They finally moved a year ago into a two-bedroom apartment in Pegasus Homes’ Wooburn Bales, in Buckinghamshire, that costs £3,300 a month.

‘We realised we didn’t want to pay stamp duty and deal with another chain of buyers again – or leave a problem for the kids. That helped us make the decision not to buy again but to take a big leap of faith and rent in an assisted living development,’ says Colin, a former publisher.

‘It’s full of similar professional residents. Jennifer likes the keep-fit classes here while I like the Friday night sundowners.’

Their move is financially viable thanks to Jennifer’s teacher pension and Colin’s private pensions will ‘cover the lifestyle we want’, he adds.

The capital from the sale of the property will cover the rent ‘for the years we can reasonably be expected to live,’ he says. The Ancliffes are not alone. For while vast numbers of octogenarians may be sprightly, for many it may not make financial sense to buy a property. However, many downsize at this age and need somewhere suitable to live.

Today, just under a million retirees live in private rented accommodation in the UK, but the figure will rise. The over-65 population is on course to be 8.3 million bigger by 2066, according to the Older People’s Housing Taskforce.

The Pensions Policy Institute predicts the proportion of retirees that will own their home in retirement could fall from 78 per cent to 63 per cent by 2041.

However, demand for later-living rentals has already outstripped supply for a ‘number of years’, says Nick Sanderson, chief executive of Audley Group, a luxury later living provider.

It’s possible that the changes to inheritance tax (IHT) in the last Budget will persuade more retirees to downsize sooner to free up cash that they can pass on to loved ones during their lifetime and reduce the risk of a tax bill.

Chancellor of the Exchequer Rachel Reeves froze inheritance tax thresholds until 2030 and announced that from 2027 unspent pension funds would no longer be exempt from inheritance tax.

These two policies will mean that growing numbers of estates will attract inheritance tax and could result in a rising number of older family members handing over gifts to reduce a possible bill on their death. All gifts are free from inheritance tax if the giver survives for a further seven years.

One of the main obstacles to renting in later years is affordability. Private rents in the UK increased by 8.7 per cent on average in the year to October, hitting £1,307 per month, according to the Office for National Statistics.

The rates being charged at some of the swankier new retirement schemes will not be covered by many people’s retirement savings.

At Birchgrove, a provider of build-to-rent retirement homes in affluent areas of southeast England, rates start from £899 a week (Sidcup, Kent), to £1,450 (Hampton Court, southwest London). Costs include all household bills apart from council tax, as well as three events a day, from gym classes to cocktail hour.

The prices may be high, but there are huge benefits to renting in a retirement home. One costly headache removed is maintenance, according to Laurence Bruce, 92 who with his wife Brenda, also 92, swapped their large home in Moray, Scotland for a two-bedroom flat in a retirement development in Gloucester.

‘If something goes wrong we just ring reception and they send up someone to fix it,’ says the retired Royal Air Force officer.

‘We decided to rent so we wouldn’t leave our son the problem of trying to sell a retirement flat, but also to free up a handsome cushion to cover our future care costs.’ 

Two years ago the couple moved into Llanthony Place, a McCarthy Stone development, where they pay £1,600 per month plus about £300 for their meals in the on-site restaurant. Laurence realises they are in the fortunate position that their ‘various pensions more than cover these costs’.

‘The move has taken a weight off our minds – but also our family’s,’ he says of his son and daughter-in-law, both retired doctors.

John Brown, 84, is also renting to avoid leaving his children with extra costs.

John Brown rents a two-bedroom flat at Birchgrove’s Woodbank Apartments in Woking, Surrey, where the monthly rent is £6,366.

The former civil engineer moved into the scheme after selling the four-bedroom family home where he and his late wife Julia had brought up their two children.

‘If I bought a flat in a retirement development the children would have to sell it after my death and there are often hefty exit fees – up to 30 per cent of the purchase price – so we looked at rentals instead,’ he says.

Birchgrove says its residents have a financial assessment to check there are sufficient funds for ten years; plus a wellbeing check to ensure they can manage independent living. John passed the affordability checks on entry thanks to his local authority pension, half Julia’s teacher’s pension which he now receives, and his state pension.

He loves his new community; he used to be alone in his home all day before and would speak to no one. ‘Now we have an iPad in our flats which asks if we are OK every morning and if I don’t respond by 10am someone comes to check.’

Living with perks and services is also part of the pull for renters, says Rick de Blaby, chief executive of Get Living, a built-to-rent operator with five schemes – for all ages – across the UK, with rents from £1,195 per month (in Manchester). 

‘Many older renters want to make new connections but are put off by the terms ‘senior living’ and ‘retirement living’. We provide an aspirational lifestyle with concierge and hotel-style facilities; and an ideal ‘lock up and leave’ property for those who love to travel.’

The average age of a person moving into rented accommodation in a development is 82, because, as Honor Barratt, chief executive of Birchgrove, says: ‘If you are playing golf at 75, it’s worth buying a retirement home, but if you are in your eighties, don’t. Renting for more than ten years would be prohibitively expensive.’ 

She says they have four types of tenants: where one of a couple has a terminal illness and anticipates the spouse living alone; childless couples selling their home to pay for future care; couples who want to release cash to help children or grandchildren; and couples who want to move closer to family but can’t afford to buy in an area.

Budgeting for constant, if high, monthly costs is also easier, she argues, as there are fewer unexpected costs. You won’t get a nasty shock when the energy price cap changes or the roof starts leaking.

However, a shortage of retirement rentals in popular locations has seen prices nudge higher.

Last summer, I found myself having gone to sealed bids on a rented flat in Kingston-upon-Thames on behalf of my 88-year-old mother, a retired teacher, and ended up paying £150 a month more than advertised, at £17,400 per year. Nevertheless she is happy having sold the three-bedroom semi-detached house she had lived in for 40 years, and was struggling to maintain.

The case against buying a flat at my mother’s age – when your caring needs can quickly change – is strong. Service charges can cost several thousand a year when you own in a retirement development, along with exit/event fees (also called deferred management fees) charged when the owner or family sells.

As Laurence says: ‘The chance of selling a retirement flat quickly is very variable.’ Their limited market and hefty service charges mean that many sell for a loss.

More affordable rentals are also needed by those who have rented all – or most of – their lives, like Cathy Bown, a dynamic 70-year-old who works for two days a week in the care industry. 

Last year she moved into Anchor’s The Dials later-living development of 57 flats in Hinckley, Leicestershire. Flats at the not-for-profit provider’s scheme can be bought via shared ownership or rented – there’s a waiting list for the 23 rentals.

Cathy, who is single and rents a one-bedroom flat for £950 a month, says: ‘After paying £550 a month for my flat in the private sector this is expensive, but my landlord was old and I was always worried I might have to move with little warning. 

I can afford this because I get some housing benefit for the over-65s to top up my state pension (and wages). I love the sense of community here, feel very safe and settled and love organising events for us all.’ 

While tenants at retirement schemes like Birchgrove and Pegasus have Assured Tenancy rental contacts so they will not face sudden eviction, those in private rentals on Fixed-Term Tenancies can get given notice after a year, or whatever the term is.

Now that many landlords are selling up, being told you have to leave at short notice is far from ideal when you are elderly.

Sue and Paul Freeman have been renting a flat since February at Cognatum’s new retirement development, The Canopy in Chigwell, Essex, for the flexibility it offers. There are 25 apartments for the over-55s, from £450,000 to buy or £3,500 a month to rent.

Says Sue, 69, a former government worker: ‘We don’t plan to rent for more than a couple of years, but we like not being tied anywhere.’