You read the personal finance pages of the newspapers and it all seems to be the impending pensions crisis ... where people aren’t saving enough for their retirement. But it’s not the lack of Docklands peoples’ future pension incomes that are my immediate concern. The fact is that so many of the future retirees in Docklands over the coming decade, who never bought their home in the Millennial years of the 1990’s and 2000’s, will have to make some tough decisions regarding what house they live in when they retire anytime between now and 2038.
In Docklands (or E14 to be exact), there are 520 privately rented households, where the head of the household is between 50 years and 64 years of age (meaning they will be retiring anytime between now and 2038). They are working now and easily paying the rent, yet what happens when they retire?
A Docklands retired couple, who currently privately rent and who have paid their fully qualifying NI stamp over the last few decades are likely to retire with the couples State Pension of £1,091 per month plus a tiny bit of private pension if they are lucky. Given that the average rent in Docklands is £2,258 a month - a lot of that pension will be lost in rent. This means taxpayers will have no alternative but to step in and top up the rent payments with Housing Benefit, yet...
What does this mean for mature Docklands homeowners? I see many using equity release schemes to stay in their homes to pay for a better retirement and others more open to downsizing, selling their large home to a family that needs it and moving into a smaller apartment or bungalow ... yet lets be frank - they aren’t building bungalows in large numbers in Docklands anymore.
And for the Docklands landlords? Well with the younger Millennials showing no appetite in jumping onto the homeownership bandwagon anytime soon, it can only result in the demands on the buy to let market from Docklands tenants rising substantially. Of course, many Millennials will inherit money from their home owning parents in the coming few decades, yet a lot won’t as it will be spent on nursing home care and any leftovers (if any) split between siblings.
For those retiring in post 2050/2060, there is better news as official reports suggest those retirees will enjoy a State Pension approximately similar to today’s pensioners with auto-enrolment into top-up private pensions through their employer.
The solution to all this is to build more homes, of course. Last year we created/built just over 217,000 households in the UK, up from a post Millennial average of just under 150,000 households a year. We need to get back to the building booms of the late 1960’s and early 1970’s when on average 300,000 households were built ... but back to reality ... that won’t happen so it looks like we are turning into a nation of renters, which is of course good news for Docklands buy to let landlords!