Nearly two million more pensioner households are expected to be renting by 2044
Pensioners who rent their homes could face housing costs of up to £400,000 during retirement, leaving many at risk of exhausting their pension savings.
With typical private pension pots worth just £154,000 for those approaching retirement, many could struggle to cover decades of rent after leaving work.
The warning comes in a new report, Pensions Adequacy: Housing, Households and Auto-Enrolment, commissioned by the ABI and produced by the Pensions Policy Institute.
Researchers found that renting a two-bedroom home throughout retirement could cost between £200,000 and £400,000, depending on where someone lives.
The report argues Britain's pension system was built for a country that no longer exists, with rising numbers of renters, changing family structures and more fragmented careers leaving more people at risk of falling short in retirement.
When auto-enrolment was introduced, it was based on the assumption that most workers would own their homes outright by retirement. Researchers say that assumption is becoming increasingly outdated.
By 2044, nearly two million more pensioner households are expected to be renting, representing a threefold increase on current levels.
The report also warns that changing household structures and interrupted working lives are making it harder for many people to build enough retirement income.
The research builds on evidence from the Pensions Commission's Interim Report and concludes that pension savings alone can no longer determine whether someone will have enough money in retirement.
Several other groups face heightened risks of retirement shortfalls, according to the report.
Single people require approximately 28 per cent more income than couples to maintain an equivalent standard of living.
Divorce poses another threat to retirement security, with just 11 per cent of separating couples arranging to share their pension assets.
Survivor benefits under Defined Contribution pension schemes are no longer guaranteed and depend on decisions made when someone retires.
Self-employed workers face particularly difficult circumstances, having no access to Auto-Enrolment, no employer contributions and no automatic system to encourage saving.
Research from PensionBee found that someone working for themselves on £30,000 annually is projected to retire with £64,000 less than an employee earning the same amount.
Maike Currie, VP Personal Finance at PensionBee, said the findings reveal fundamental problems with how the pension system operates.
"This report lays bare a structural mismatch at the heart of the pensions system. Auto-Enrolment was designed for a Britain where most people bought a home, stayed in one job for years and retired as part of a stable couple household.
"Today Britain looks very different, with rising housing costs, more fragmented careers and changing family structures," she said.
Ms Currie called for policymakers to use Self-Assessment tax returns to encourage pension saving among the self-employed, describing it as a simple reform that could transform retirement outcomes.
She also urged the government to reduce the Auto-Enrolment starting age from 22 to 18, giving younger workers more time to benefit from compound growth.
