Opportunity is being lost to prepare the ground for change and the comedown post-election will be painful.
It’s funny, isn’t it, how we tend to pay more attention to certain subjects only when we realise their potential impact on our daily lives?
In my case, issues around retirement planning, as it becomes evident I may only have a limited amount of work time left before I start drawing some or all of my pensions.
It’s not just my own personal retirement issues that have suddenly become fascinating to me. In fact, I now find myself reading about other people’s problems far more avidly than before.
The proportion of households that own their home in retirement could fall from 78% to 63% by 2041
For example, in an intriguing Money Marketing article the other day, Pensions Policy Institute (PPI) senior policy researcher Anna Brain noted its research has identified a likely threefold rise in the number of pensioner households living in privately rented homes by 2041, of whom fewer than one in five will have the funds needed to cover their rent through retirement.
The proportion of households that own their home in retirement could fall from 78% to 63% over the same period.
Even today, news outlets such as the BBC are increasingly writing about how retired people living in privately-rented properties are being turfed out of their homes because they can’t afford the ever-escalating rents landlords are charging.
Just this small piece of information has a range of potential consequences, not only for elderly people who become homeless in old age, but others whose retirement incomes will be massively squeezed as larger and larger proportions go towards keeping a roof over their heads.
There are no easy choices any incoming government can make when it comes to ensuring older people can live in dignity after retirement
And what of their children, who may have harboured hopes of the Bank of Mum and Dad stepping in to help them with a deposit when they were ready to make their first step up the housing ladder? If Brain is right, that’s far less likely to happen.
She makes the point that while issues such as the triple lock, tax and state pension age are all important, “what matters most is not looking at them in isolation. A shift in one objective or component of the UK pension system can, through a complex web of interactions and trade-offs, lead to a catalogue of impacts in others”.
She is also correct to say there are no easy choices any incoming government can make after 4 July when it comes to ensuring older people can live in dignity after retirement, partly because so many of those decisions are not directly related to pension incomes.
The opportunity is being lost to prepare the ground for change
What worries me, however, is that elections are supposed to offer the opportunity of reflection and genuine choices, based on intelligent examination of all the options.
Yet the main parties appear to be vying with each other to pretend an increasingly decrepit retirement and social infrastructure more generally can simply be made good through “economic growth” and greater – unspecified – spending “efficiencies”.
Amid the current refusal to trust voters with any genuine discussion of alternatives, where any proposal to raise even a couple of extra quid in taxes goes down like a fart in church, the opportunity is being lost to prepare the ground for change.
If this remains the attitude of all parties, then the comedown in the aftermath of the election will be even more painful.
In the absence of any government will to do so, there is a desperate need for experts in the private and public sectors, as well as think tanks like the PPI, to come together and begin to spell out both what the needs of people in retirement are and the options to address those going forward.
It can’t happen too soon.
Nic Cicutti can be contacted at nic@inspiredmoney.co.uk
The UK, and England in particular, is addicted to the housing ownership market – this has done more to restrict other investment than any other.
The simple fact is, you have to live somewhere – a need – with all the attendant costs that go with it… so, have this as owned and enjoy the security of tenure and continuity… costs, perhaps, too.
Rents do not allow the incumbent anything to look forward to. With a mortgage, after a period of time payments cease, no so with rent. In addition, ownership – no mortgage – give much in the way of retirement or older age possibilties…
Above all, the paying off of principal locks in a high, equivalent, investment return – risk free. Pensions suffer, too, from the charging structure over decades… why can’t auto enrolement just charge for 25 years as a maximum time, or reduce at least?
The withdrawal of higher rate relief, with a ‘blended rate’ of, say, 25%, would go a long way to encouraging the mass take up of retirment provision… All the Govt. has to do is to convince the fund management industry to reduce their pay, bonuses, and pension take…well, good luck with that!!
The principal root of the (lack of) home ownership problem for those of modest means can be traced back to Thatcher’s government having flogged off council houses en masse at knock-down prices and then not having used the money realised to build new ones.