The UK can no longer treat housing and pensions as separate policy issues if it hopes to solve the growing retirement adequacy crisis, according to the Society of Pension Professionals (SPP).
While UK retirees currently hold an estimated £3.8trn in housing wealth, the SPP said they still faced an aggregate annual retirement income deficit exceeding £48bn.
In a new report, published this week, the SPP highlighted housing and pension policies as a critical structural mismatch within the UK economy.
Many current retirement planning models rely on an outdated assumption that most individuals will retire mortgage-free. However, the SPP warned that with declining homeownership rates and a sharp rise in lifelong renters, many people will require an estimated £269,000 more in pension savings to cover rental costs – leaving millions of people unprepared.
“We need an integrated approach, one that unifies guidance, updates living standards to reflect real housing costs, and unlocks institutional pension capital to help build the homes the UK desperately needs.”
Amanda Cooke, chair of the SPP Financial Services Regulation Committee, said: “Pensions and housing draw on the exact same household resources, yet policy treats them as completely separate worlds.
“While current retirees often rely on property equity to mask savings shortfalls, future generations facing high rents and lower homeownership rates simply won’t have that cushion. We need an integrated approach, one that unifies guidance, updates living standards to reflect real housing costs, and unlocks institutional pension capital to help build the homes the UK desperately needs.”
In particular, the SPP explained that fragmented advice, separate regulatory regimes, and tax barriers such as stamp duty prevent people from making holistic decisions about their wealth.
The report follows a call from the Pensions Policy Institute to reform housing benefit so that it does not negatively affect pension income. More than 300,000 pensioners are judged to be around £50 a week worse off due to the way in which housing benefit is means-tested.
Bringing pensions and housing closer together
The SPP’s report outlined six key recommendations, including merging housing wealth into mainstream later-life advice platforms such as MoneyHelper and Pension Wise to break down regulatory silos between mortgages, equity release, and pensions.
The SPP also called for metrics such as Pensions UK’s Retirement Living Standards to account for rental and mortgage costs in later life. Analysis by Hymans Robertson last year found that housing costs can make a significant impact on the standard of living individuals can expect in retirement, and warned this was not reflected in widely-used figures.
Older people could be given stamp duty tax relief when downsizing, the report explained, while younger people could be supported to save for a house as part of employer-backed savings initiatives alongside saving for retirement.
The society also urged the creation of standardised housing investment vehicles to channel institutional pension capital into residential development and boost housing supply. Two Local Government Pension Scheme asset pools recently launched a dedicated residential property investment vehicle called Four Corners to manage existing holdings and grow their investments in this asset class.
The final recommendation of the SPP’s report involved recycling care-funded assets by exploring mechanisms to acquire family homes liquidated to pay for social care and use pension capital to retrofit them into social housing.
