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Anne Ashworth Your home is not a pension at any age

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Fri 07 Jun 2019

Anne Ashworth Your home is not a pension at any age

t’s common to meet a proud homeowner who describes their property as their pension, declining to build up any other source of long-term provision. This is a stance that causes considerable dismay to those who love their home, but also have a diversified investment approach, based on real estate and other assets.

These people were particularly shocked at the suggestion from a government minister this week that millennials should be able to raid their pensions to climb on to the housing ladder. There was also consternation at the Department for Work and Pensions, which had not been consulted on the plan expounded by James Brokenshire, the housing secretary.

The objections were based on practicalities, rather than any wish to deprive Generation Rent of opportunities. The pension pot of the average twentysomething would not be sufficient to fund a deposit. Meanwhile, increased longevity and changes to the nature of company pension schemes mean that younger generations need to prioritise putting plenty of money aside for their later years.

The Brokenshire plan may not be workable, but we should still sit up and pay attention. The race is on to formulate housing policy that resonates with disaffected young voters. Expect more strategies this summer on this and property taxation (see below).

Statistic of the Week
This week’s contenders included data on the new super-discount mortgage deals. The average rate on a two-year fixed-rate loan has dipped to 2.49 per cent, while the average rate on a five-year fixed-rate loan is 2.85 per cent, as Moneyfacts, an analytics group, highlights. The gap between these two types of loan has shrunk to a seven-year low of 0.36 per cent, causing a race among borrowers to fix their outgoings until 2024. Offers of 1.79 per cent are available.

Easy money is a boon for homebuyers, but some observers blame cheap mortgages for rising house prices. Land for the Many, a new polemic report sponsored by the Labour Party, proposes that the Bank of England impose controls on such finance to stabilise prices and make property more affordable. But as Capital Economics, a consultancy, points out, the Bank already intervenes in lending and “the policy would end up favouring cash buyers”.

Land for the Many also calls for higher bands of council tax, which owners of large properties with big gardens would not favour, and the abolition of stamp duty, an idea that they may find more pleasing. But again, Capital Economics asks how the lost revenue would be replaced: stamp duty raised £8.55 billion last year.

We chose this as our Statistic of the Week because this report marks the start of a broader debate on property taxation, extending to inheritance tax and capital gains tax. The suspicion is growing that, whoever is the next occupant of that elegant property 10 Downing Street, raising more money from property taxes will be on the table.

Hartford traditional Shaker kitchen, from £20,000 (Tom Howley)
Hartford traditional Shaker kitchen, from £20,000 (Tom Howley)

Shake it up
The 18th-century founders of a spiritualist Christian sect probably did not imagine that their longest-lasting legacy would be a style of kitchen design hugely popular in the 21st century. The Shakers believed in celibacy, equality between the sexes, technology, mindfulness (as we call it today), and simple and unadorned forms. Elements of this creed seem to chime with contemporary taste, since the Hartford, Shaker-style range accounts for 80 per cent of sales at Tom Howley, a kitchen-maker. The Shaker movement
is associated with asceticism, but they would dance during prayer. As a result, they would fashion chairs to be hung on walls, out of the way of their revels.