Homeownership or retirement? Rethinking financial wellbeing strategies in the workplace

Barnett Waddingham looks at what constitutes financial wellbeing and how employers can focus on strategies to improve it.

The role of financial wellbeing in workplace benefits strategies has evolved over the years and has now become more prominent than ever.

For employers, this means going beyond offering pensions and bonuses to include a much broader range of products and services to support financial wellbeing.

One offering that has gained a lot of traction recently is retirement planning, and we expect the provider market in this niche space to become increasingly active.

Retirement planning is not just having a pension scheme you save into, but involves setting retirement goals such as:

The level of income you will need;
What you expect your expenses to be; and
How to manage risks and unforeseen events.

One conversation that has emerged in this context is the issue of home ownership and the different ways this can be viewed and approached. This, in turn, has led to the question of whether employers should focus on financial wellbeing strategies that prioritise home ownership over retirement planning.

This question seems to imply that home ownership is being viewed as an alternative to pension – that is, as a strategy where individuals put their surplus funds toward a deposit on a house rather than into a pension as additional contributions.

With this idea in mind, we can consider briefly the main points of both strategies by looking at the following:

Prioritising home ownership

Owning a home often provides long-term financial security which would safeguard an employee against volatile rental markets and the uncertainty of evictions and costs. In addition, property is a financial asset and generally tends to appreciate in value over time.

However, employers run the risk of unintentionally alienating a section of their workforce if home ownership is prioritised over planning for retirement. Some people may simply never become homeowners in their lifetime, but everyone will eventually retire – whether partially or fully, with or without savings, through necessity or by choice.

As such, a strategy that prioritises home ownership over retirement planning might introduce an element of exclusivity, even if well intended.

Prioritising retirement planning

Retirement planning remains an essential part of long-term financial wellbeing and UK employers are legally required to contribute to employee pensions through auto-enrolment - so there will always be a base level of retirement planning that exists in the workplace.

Furthermore, those who start saving early will have a huge advantage due to the time-value of money invested. If employees prioritise saving for a house rather than contributing to their pension, they risk losing valuable pension growth that they may never be able to replicate.

Unlike home ownership, pension contributions offer predictable and structured income, whereas relying on property alone can be risky due to the cost of maintenance and fluctuating property markets.

Integrating financial priorities

It’s clear that both these approaches offer value - prioritising either home ownership or retirement planning can work for certain individuals in the right circumstances.

However, a more sensible approach might be not to choose, but to accept that both priorities are interconnected. An effective financial wellbeing strategy for HR leaders should therefore be not to prioritise either but rather support employees in achieving both goals.

In Barnett Waddingham’s recent research, the At Retirement Reckoning, the findings point to some significant differences in attitudes toward retirement depending on someone’s homeownership status.

The research indicates that homeowners are more confident of a comfortable income in retirement (66%) than those who rent (48%). Furthermore, homeowners are more likely to have set clear goals for retirement (49%) than those who rent (30%).

Again, indicators like these do not necessarily justify prioritising home ownership over retirement planning, but it does highlight the fact that home ownership forms a crucial part of planning for retirement.

Put another way, if an individual’s priority is to ensure a comfortable retirement and to plan accordingly, home ownership is likely to be a sensible goal for most people.

Consequently, employers should explore the ways in which support to this effect can be provided by way of relevant financial wellbeing initiatives such as mortgage advice webinars, home-buyers workshops and workplace ISAs (lifetime ISA contributions).