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16 Feb 2024

Property vs pensions: why an holistic view is better for funding retirement

How employers can support their employees’ financial futures, and help them engage with their pension savings

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A third (33%) of Gen Zers believe property, rather than pensions, will fund their retirement.

This is according to Standard Life’s Retirement Voice 2023 research, which reveals different attitudes between generations when it comes to funding life after work.

But Millennials and Baby Boomers in particular favour pensions over property as their main asset in retirement.

While it might seem understandable that younger generations might prioritise property over pensions, Standard Life insights reveal that relying on property to fund retirement may not be a realistic expectation.

A holistic approach could be a better way 

According to its research, just 10% of Gen Zers have a mortgage, while 20% are worried about still having a mortgage to repay in retirement.

Furthermore, the Longer Lives Index, produced by think tank Phoenix Insights, estimates that more than 13 million people are likely to face rental or mortgage costs in retirement.

For Gen Z in particular, it could be harder to rely solely on property than for previous generations. They’re facing higher house prices compared with their salaries, higher mortgage costs, and rising rents that could prevent many of them from saving enough to buy.

This highlights the importance of funding retirement holistically, rather than putting all their eggs into one basket. Indeed, owning property and saving into a pension aren’t mutually exclusive and can sit together as part of a diverse portfolio.

Indeed, for employees, pensions have advantages over property. These include tax relief on contributions, employer contributions and the potential to benefit from investment growth. On the downside, employees need to wait until the minimum pension age to access pension savings. Again, there are benefits to this, given that pension savings need to provide the right standard of living throughout retirement.

However, it shouldn’t be forgotten that the value of investments can go down as well as up, and employees may get back less than was paid in.

Help employees engage with retirement savings

As an employer, you can play a vital role in engaging with people of all generations and making sure the support and communications they receive are relevant to their needs.

Here are some tips to help you get started:

  • Help employees get a better view of their money: Open finance tools, like Standard Life’s Money Mindset, lets employees see all their money in one place, including their bank accounts, savings, pensions and mortgages. Not only can this help employees spot any gaps and where to take action, it can also help support their wider financial wellbeing.
  • Promote awareness of your workplace pension: Promote awareness and build up employees’ knowledge of your pension offering via a communications campaign. Standard Life offers a Client Analytics tool to see which groups are engaging with their pension, to help you send targeted, personalised communications to specific members.
  • Support first-time buyers: For Gen Z and Millennial workers, getting on the property ladder is likely to be a high priority. Standard Life’s Homebuyer Hub tool can support its workplace pension scheme members through the process to buying their first home, helping to simplify the homebuying process, plus personalised guidance based on members’ savings goals.

For more insights on financial wellbeing, including resources on how you can help support your employees, visit Standard Life’s Financial Wellbeing hub.

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In partnership with Standard Life

Standard Life are part of Phoenix Group, the UK’s largest long-term savings and retirement business. We both share an aligned ambition to help every customer enjoy a life full of possibilities.

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