The UK Pension Commissioner’s report, published last week, draws a link between the growing pensions crisis and the housing market, which press coverage generally seems to have overlooked. Highlighting an estimated 400,000+ Buy-To-Let mortgages on rental properties (often several in the hands of one individual), the report suggests the use of BTL as a “savings” device is likely to be very volatile with wildly differing potential pay-offs for different individuals, depending on how shrewd, or more pertinently how lucky they are. This is largely because of the leverage/debt involved.

However, in aggregate, the report points out that by driving up house prices, and removing housing stock from the owner-occupied sector, BTL sets back the opportunity for first time buyers to enter the market, and saddles them with mortgage debt until much later in life than was the case for earlier generations. This in turn compounds their savings problem ahead of retirement.

Perhaps most noteworthy in the report was a large section on behavioural economics, which indicates when the recommendations are delivered next year, they will be much better framed in the light of human behaviour and our cognitive biases than previous government attempts to encourage saving.

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