Abstract
Recent reforms to pensions in the UK have been driven by low levels of retirement savings, increased life expectancy and public expectations of standards of living in later life. The government has introduced auto-enrolment of employees into occupational schemes for the purposes of increasing the numbers of those saving for retirement. To lessen budget deficits, they are also seeking to introduce measures, which will make non-pension savings more attractive. The government’s desire to reduce budget deficits has made the future of State Pensions uncertain, and the onus of retirement provision is increasingly moving towards individuals. Consequently, more people are looking to use their house as a retirement asset. There has been a significant rise in the demand for mortgage products in the 65+ population, and an increasing number of consumers are taking out mortgages that will extend into their retirement. However, the existing mortgage market in the UK is not equipped to support the changing pattern in consumer needs. In addition, the changing political and social environment in the UK has created uncertainties in housing and mortgage markets. In this chapter, we report and explain current developments in pensions, housing and mortgage markets in the UK. Our analysis indicates that each of these sectors has reached a turning point necessitating significant responses from stakeholders and policymakers.
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- 2.
The annual allowance is how much can be contributed annually by an individual to their pension pot before contributions cannot be made from pre-tax income. It increased up to the tax year 2010–2011 reaching £225,000. At that stage, it was reduced to £50,000 falling further to £40,000 in the tax year 2014–2015.
- 3.
The lifetime allowance was first introduced in 2006. The objective was to restrict the amount of tax relief that pension pots could accumulate. It was set at £1.5 million in 2006, increasing to £1.8 million in 2010, and then it has subsequently been reduced, and from 2017 to 2018, it is set at £1 million.
- 4.
The latest Wealth and Assets Survey published in 2016 related to the survey period July 2012 to June 2014.
- 5.
The triple lock is viewed by some politicians as a particularly expensive guarantee and consequently is unlikely to be maintained in the long term.
- 6.
Total membership includes (1) active members (i.e. current employees who are contributing), (2) pensioner members (presently receiving pension payments) and (3) members with preserved pension entitlements (i.e. those no longer contributing into the scheme but have accrued rights that will come into payment at some future time).
- 7.
From April 2019, the total contribution rate of 8% includes an employer contribution of 3% and employee contribution of 4% and 1% in the form of tax relief.
- 8.
The Housing Act 1980 extended the ability of all social tenants with secure tenancies to buy their home by making this practice a tenant’s legal right rather than it being at the landlord’s discretion. The maximum discount on a house for social tenants under the Right to Buy increased from 60% to 70% of its value in 2014.
- 9.
Inheritance tax guidelines available at https://www.gov.uk/inheritance-tax/overview
- 10.
Key UK mortgage facts available at https://www.cml.org.uk/industry-data/key-uk-mortgage-facts/
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Sharma, T., McKillop, D., French, D. (2018). Pensions, Housing and Mortgage Markets in the UK. In: Eckardt, M., Dötsch, J., Okruch, S. (eds) Old-Age Provision and Homeownership – Fiscal Incentives and Other Public Policy Options. Springer, Cham. https://doi.org/10.1007/978-3-319-75211-2_5
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