John Deacon: Pensions or housing – it shouldn’t have to be a choice

The concept of dipping into your pension for a deposit on a house has understandably caused controversy. Barely a week goes by without people being reminded they need bigger pension pots, not smaller ones. How could taking money from already inadequate pensions be a good idea?

But for many young employees, the dream of getting onto the housing ladder is becoming just that – a dream. So how can employers balance these competing goals? Should they even try? The answers are by offering flexibility, education and support and yes, they absolutely should try.

Understanding the challenge

With property prices continuing to rise, even those saving for deposits often see the sums they need growing by more than they are able to save. Even if an employer offers large pension contributions, this money is locked away for decades and is less appealing than money staff can use today. However, it’s incorrect to assume that all young people are the same. While pension take-up amongst the young is lower than at other ages, opt outs of pensions have been lower than was initially feared. Younger employees understand the need to save for the future – but the pressure of saving for a house usually outweighs the need to have a robust pension.

The solution? Employers need to help them achieve both.

Support and trust your employee’s needs and everyone wins

There are growing concerns in business about a need to help employees retire. Having experienced and knowledgeable people continuing to work in the company is a valuable resource, but if staff are not there out of the passion for the job, it can easily turn into a bad thing for the business. A cohort of people working because they cannot afford to retire means disengaged, demotivated and less productive employees blocking pathways to career development for colleagues. This is not good for anyone.

But equally, without a solution to their housing problem, many employees will need more income for a comfortable and secure retirement because the levels of income required in old age usually assume no housing costs. The mortgage will be paid off. But rent doesn’t stop.

Finding the balance is important. Could employers consider a savings budget instead of a pension budget? If younger employees reduced pension contributions to a lower level could businesses offer cost-neutral payments into non-pension savings products?

Financial wellbeing – it really matters

This is where the key tenets of financial wellbeing come into play. Assist your employees to make financially capable decisions in key aspects of their lives. Fundamental to that is providing them with access to suitable products and policies. Businesses usually do that with a pension and it is probable they can turn on some form of non-pension savings very easily at little if any cost. But employees also need the skills and the knowledge.

This is where education, engagement and communications come in. Help them understand the incredible benefits of a pension and they will happily save into them. For many, the biggest disadvantage of a pension is that you cannot take the money out, but people often understand that is also a pension’s biggest advantage.

But employers can provide the ability to save and invest for other purposes as well.

Employers can help generate a budget to save. And this is often done by increasing the return on an investment, businesses’ are already making. Common benefits such as discount vouchers, savings on gym membership, season ticket loans, salary sacrifice or helping with low-cost debt solutions can reduce costs thereby creating a budget you can help them save. They just need joining up.

Value not values

But this is not just about doing the right thing. Helping your employees with their money worries benefits everyone. The evidence is mounting that financial worries impact productivity. People who are worried about money bring that worry to work. Be it lost sleep, lack of focus or time off due to stress, it is increasingly understood that the money worries of your employees are impacting your bottom line.

And it should be clear that while pensions versus housing is an acute version of this issue, difficulties with debt, concerns over retirement decisions or how best to save for children’s education are all things that could be worrying employees and are things an employer can help with.

Big change or small evolution?

While this is a big challenge, it need not mean big change. It is really about strategy, co-ordination and changing the way you look at rewards, remuneration and the products you offer your colleagues. Look at outcomes instead of products. Offer answers to your employees’ questions not information on another product or policy. Through education, financial wellbeing initiatives and everyday benefits, you can help staff achieve key goals in their life stages without sacrificing their future.





John Deacon is Head of Employee Benefits at Buck. With over 20 years of experience, John is an expert in change management, benefits design, worksite marketing and implementation. His work spans pensions, health programmes and group risk, either in isolation or within a programme of flexible benefits.

As a senior executive operating at board level within Buck, John is adept at combining both professional and management skills to deliver strategic vision, growth and results for clients as well as the business.