Trustees urge Pensions Commission to consider housing and rental costs for retirees

The trustee representative trade body has voiced its support for the government’s intention for the commission to look at disparities and inequalities in retirement saving, in particular those relating to gender and race.

The AMNT also urged the new commission to build upon the work of the initial Turner Commission, but take into account the societal changes that had taken place in the two decades since its final report.

In particular, it highlighted the cost of housing. Among the outputs of the Turner Commission’s work was a conclusion that people on an ‘average’ income would need the equivalent of two-thirds of their pay as a pension to enjoy a comfortable retirement.

The AMNT said this should still be set as a benchmark, but with the explicit acknowledgement that more people will be renting in their retirement than was the case 20 years ago.

“As ‘generation rent’ begins to reach retirement age in the next 30 years, even two-thirds may not be sufficient to keep that generation’s elderly out of a diminished retirement.”

Maggie Rodger, AMNT

Maggie Rodger, co-chair of the association, said: “We remind the commission that the figure of two-thirds is based upon a society where most people own their homes.

“As ‘generation rent’ begins to reach retirement age in the next 30 years, even two-thirds may not be sufficient to keep that generation’s elderly out of a diminished retirement. Any projections given for required savings rates or minimum standards in the future should bear in mind this fundamental generational change.”

Rodger raised the issue with work and pensions secretary Liz Kendall and pensions minister Torsten Bell at the launch event for the new Pensions Commission today (21 July).

In response, Kendall acknowledged that paying rent or mortgage costs in retirement was a major cause of the “tsunami of pensioner poverty that is coming our way”.

She added: “On the big picture, the government has a huge strategy to build 1.5 million more homes, including social and affordable housing, and to improve renters’ rights.

“We’ve also got big plans to get more people into good quality jobs in every part of the country, and it is worth saying that, because that is the long-term solution to this. But I’m sure that the commissioners will be taking all of these issues into consideration.”

‘Substantial’ government and employer input necessary

Many pensions industry commentators and organisations have called for the minimum level of auto-enrolment contributions to be raised from 8% to 12%.

However, the AMNT argued that even this higher level was unlikely to be enough to support renters in retirement.

The association stated: “Bearing in mind the substantial additional costs being faced by future generations when compared with today’s pensioners – which include student loans and spiralling rental costs caused in part by a dire shortage of social housing and substantially increasing childcare costs – then reaching an acceptable savings rate seems even harder without substantial additional government or employer input.”

Work and pensions secretary Liz Kendall confirmed this morning that the minimum contribution rate would not rise during this parliament.

The AMNT also called for a “careful review” of tax incentives and employer contributions to ensure they benefit low earners, including consideration of those who are working but do not receive any employer contributions because they earn below the auto-enrolment threshold.

“There are tough decisions to be made and no easy solution,” Rodger said. “However, we need to thoroughly test assumptions and systems and collectively find ways to ensure that people can be supported to save more during their working lives, in more efficient and productive financial products if a financially blighted retirement, and all that means for the wider economy, is to be avoided for many of our children and grandchildren.”