Don’t ask me about my pension. It’s not that I haven’t got one. In fact, I’ve got a few, squirreled away with various ex-employers. But there’s not much in them, and I know I’m underprepared for retirement. Like many older millennials, I’ve prioritised other things before saving for my later years: first buying a home, and later having a family, the punitive cost of childcare now wiping out any chance I might have had to plan harder for the future.
And I consider myself one of the very lucky ones. So many of my generation have been priced out of the housing market altogether, spending their shrinking salaries on ever-spiralling rental costs and often feeling forced to put off having children in perpetuity.
I’ve accepted that my retirement planning will be a twilight scramble rather than a steady accumulation of savings. But, when I can finally afford it, how much extra will I need to put away? According to academics at Loughborough University, who carried out research for the Pensions and Lifetime Savings Association, a single person needs a stash of £10,900 per year of retirement to achieve a “minimum standard of living”, rising to £16,700 for a couple. It sounds oddly achievable, particularly with the help of a state pension.
That calculation does suggest a modest lifestyle for the later years – no overseas holidays, no car and only £41 a week to spend on food shopping. The PLSA claims that last year’s Covid lockdowns had given working people “a taste” of what their retirement needs might be. To which I’m sure most of us might say: thanks but no thanks.
For those who wish to live out their later years with more of a flourish, twice that sum must be saved. If you’re hoping your retirement might include, among other things, an annual three-week sojourn to Europe – let’s call it the baby boomer model – that’s going to set a single person back £33,600. Slightly more confronting. Having said that, it also factors in the cost of a subscription to Netflix. Take and leave what you will.
Still, something feels very wrong – and it is. Dig down into how these estimates account for housing costs and the folly is exposed. A modest annual expenditure on DIY and redecorating one room a year isn’t going to cut it.
The assumption built into these retirement projections is that by the time you’re ready to wrap up work, housing costs – in the form of a mortgage on an owner-occupied property – will have been reduced to zero. Work hard, pay off the mortgage, enjoy your retirement. What could be simpler?
That reality is already, today as I write, past its use-by date. For working people who really need help to financially prepare – people in their midlife, often wrangling children and exorbitant childcare – the idea that housing costs will ever be zero is laughable.
Those who are lucky enough to own their own home are now buying at a much later date. The average age of the first-time buyer has fluctuated over the pandemic but in the last three years has stood somewhere between 32 and 35. That’s taking the first step on the ladder, remember; any later moves that follow, as families grow in size, mean extending mortgages well into what would traditionally be labelled as retirement years. We expect to work later, we’ve made our peace with that, but we still need to prepare for a path out of work before succumbing to frailty – and it’s likely we’ll still need to cover a mortgage when we do.
That’s only half the story: many older millennials, and even some Gen X retirees, will never own their own home. They’ll be paying rent throughout their retirement. £10,900 suddenly feels deeply unrealistic. Even if they do meet that target, they’ll still be claiming housing benefit for a portion of their rent. People often wonder why British governments, even governments on the left of centre, are so obsessed with home ownership. They assume it has something to do with aspiration and identity, some acceptance that deep down everyone wants their own piece of Little England. That’s not it; it’s the realisation that paying housing benefit for a generation of older, non-working people could sink public finances.
My generation of geriatric millennials has dispensed with the idea – perhaps with the hope, if you want to be maudlin about it – of a cut-off date after which we can sit back and relax. Our working lives aren’t linear now, and we don’t expect them to come to an abrupt conclusion either. But policy makers, even those rooted in the retirement world, are still detached from this reality. We need those who can tell us what to save, and where to save it, to understand what our retirement will actually look like. The more of this irrelevant information we have thrust upon us, the more we’re likely to ignore it.
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