It also allows people to notionally ring-fence a part of their pension to be used should they need social care, without facing penal tax on the remaining funds on death. Recent research found that more than half of those surveyed would be interested in using a solution to fund long-term care in advance. It also found 43 per cent of people were in favour of using their pension to fund social care costs. This is a solution that would not only combine social care considerations with retirement planning, but also increase the need for advice.
Thinking more holistically, the government could also take active steps to reduce pressure points across the generations by developing more joined-up housing and retirement policy. With intergenerational fairness a buzzword at this year’s Conservative Party conference, it was no surprise to see the prime minister extending the government’s Help-to-Buy scheme in support of aspiring home owners.
But it is clear that more can, and should, be done to help ease pressure across the generations. Stamp duty remains a big issue for those at both ends of the age spectrum. Not only is it yet another barrier for first-time buyers to get on the housing ladder, it acts as a financial disincentive to those within the older generation looking to downsize. This group is often under-occupying, so moving to a smaller property would not only free up family homes to those in greater need, it could also free up funds for property-rich, pension-poor older generations to fund an increasingly longer and more costly retirement.
With a fragile parliamentary majority it would be easy for the chancellor to be timid in the November budget, but there is an opportunity to be both bold and transformative.
Every generation faces its own challenges, financial and otherwise, and these have changed dramatically. Figures show those who have retired in recent years have almost caught up with the incomes after housing costs of those of working age, largely because of generous defined benefit schemes and more affordable property purchases. But younger generations in defined contribution schemes need to be helped to understand that they are less likely to enjoy the same retirements as today’s golden age of retirees.
Agreeing on the best approach to intergenerational fairness will not be simple, but it need not lead to a battle of us versus them. Most younger people want to see older generations have a dignified retirement, and parents and grandparents want to see future generations have the best start in life they can, without being crippled by financial burdens.
