Missing the whole point of pensions

Over half of 15-35 year olds say they would start a pension if they could buy a house with it. Which is entirely missing the point of pensions, says Merryn Somerset Webb.


Young people would rather thave a house than a pension

An odd press release arrives from the usually relatively sensible group, Now: Pensions'. It calls for "greater flexibility in pensions to encourage young people to save".

The reasoning is simple 58% of 18-35 year olds aren't saving into a pension. Now: Pensions thinks they should be, so it asked them what would make them do it.

According to 54% of them, the answer is the ability to use their pension pot "to fund a first-time property deposit". Another 42% say they would be more likely to save if they were offered a financial "kickstart" by "the government" (I think we can safely assume they mean the taxpayer).

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This is all absurd. The whole point, I repeat the whole point, of a pension is that it is very long-term saving for a defined purpose the financial support of a pensioner in retirement.* If you can take the money out whenever you want to buy houses, the whole point is therefore lost.

And as for the business of a kick start, what on earth do Now: Pensions and the 18-35s think the tax relief is? Every time they save into a pension they get all the tax they might have paid on the money back. That's a huge kick start at the expense of other taxpayers.

Finally, I would say that the fact that 58% of the young aren't saving for retirement isn't all bad news at all. It means that 42% are a number much higher than I would have expected given that there is no such thing as an 18-27 year old who could care less about pensions.

Auto enrolment muddies the waters here, but look at it like this: if 18-27 year olds aren't saving for retirement at all it would suggest that not far off 80% of the rest are. Amazing!

*Although I guess that is changing with inheritability the whole point for the rich is now to use pensions to avoid IHT we'll have a report coming out on this soon.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.