The young are having to pawn their own dream retirements in order to save increasing amounts to afford their first house
March 15, 2023 4:39 pm(Updated 4:40 pm)
For most of us, the ability to save £1m into our pensions is a dream akin to winning the lottery. Imagine that! But for some people – I’m guessing Jeremy Hunt, most top-flight politicians and some higher-paid NHS workers with fantastic final-salary pensions – it’s a reality.
But if you are under 30, it is very unlikely to be your reality. And after today’s budget, which did nothing for those without kids or a whopping pension pot, any chance that it might have become your reality are have shrunk still further.
What is most galling for these people – and I’m talking mainly about the young – is that they are having to pawn their own dream retirements in order to save increasing amounts to afford their first house, with rents going up all the while.
Jeremy Hunt is such a polished presenter, it’s hard not to be lulled into the feeling that everything he’s talking about is entirely reasonable. But leaving young people out in this way is anything but.
Normally, the Government at least acknowledges there is a housing crisis. A bone is thrown to would-be first time buyers in the form of some complex shared ownership scheme that no one wants, or the chance to buy a shoddily built overpriced newbuild flat more easily. But even these things were not offered.
Paul Johnson, in an interview for i this week, laid out exactly how young people have been clobbered for the past 20 years. The rock-bottom interest rates that have allowed homeowners to get ever-bigger mortgages have pushed up property prices. They have also allowed more people to invest in the stock market, pushing up the prices of stocks and growing the pensions funds. Young people, meanwhile, have been less able to save for the long-term, whether a home or a pension.
Housing is intimately linked to pensions. The calculations analysts make about how much money you need to save to afford a basic, comfortable or luxury retirement are curently done on the premise that you own your home outright. But this is no longer a reasonable assumption – and today’s Budget has done nothing to make it less reasonable.
Because if you can’t afford to buy a home, in retirement you’ll be left having to somehow pay rent out of your pension, or still paying off your mortgage as you couldn’t buy till later in life, and you’ll have a completely different standard of living post-work than someone who does not.
If the Conservatives do win in the next election, they are going to have to make significant reparations. To a generation of graduates who are already paying the same level of tax, once you factor in student loan repayments, as high-flying doctors and lawyers – and who will never be able to save anywhere near £1m in their retirement.
And many younger people may feel they are doing this in order to pay for tax breaks to someone who already has a very large one.
I’d love to know how much Jeremy Hunt has in his pension.