Could pension pots solve the housing crisis?

Hatcher says that, as trustees, the traditional fiduciary lens has focused on maximizing the size of a pension pot at retirement and protecting assets. But in a world where financial risk has shifted entirely onto the saver, what does a slightly larger pot at 67 actually mean if a member spends their 30s facing housing insecurity—or enters retirement paying exorbitant private rent?

Her conversation with Steve Webb – which has also been turned into a podcast – tackles this very paradox…

Webb – who joked at the start of our chat that "Now I'm no longer a politician, I suppose I actually have to answer the question I've been asked!" – brought his trademark candor to the table.

As someone who admits "cut me down the middle and you'll see pensions," Webb joined me to explore whether it is time to expand our definition of fiduciary duty to support a member's total financial journey, rather than just the final destination.

This has to be the subject I am most passionate about! Helping to efficiently create long term wealth for people is a soap box I will always get on. This has to be a formula where by we help the public to have a reason to save more into their pension, whilst creating that long term wealth. This saving has to be sympathetic to student loans, debts and other family needs not competing or creating financial inefficiency.

Early access has to be the key, imagine a world where the government announced adequacy rising to 12%, but under circumstances – ie for a housing deposit – you can access up to 25% of your pot once. Instead of competing with saving for housing deposits, now the pension becomes part of the solution and helps generate long-term wealth by avoiding renting.

I explore this more with Webb, get rightly corrected for saying some people look at pensions as a tax, and welcome his thought that the 25% tax free allowance could be at any time in life. This was a good one, well worth a read or listen!

The rent crisis versus the tax break theology

According to research by the Association of British Insurers and the Pensions Policy Institute, by 2044, 1 in 3 pensioners will be renting privately, with rent costs vastly outstripping average DC pots (estimated at around £154,000). Renting in retirement is fast becoming the single greatest threat to a comfortable old age.

Historically, HM Revenue & Customs has maintained a strict theology: tax breaks are granted in exchange for locking money away until retirement. But as Webb pointed out on the podcast, pension freedom and choice already challenged that logic by establishing that this is, ultimately, the saver's money.

While we both agree that opening pension pots for general hardship creates a legal minefield of grey areas and bad incentives, housing is a completely different beast.

There has been so much research that proves why accessing housing over long-term renting erodes value for savers, NEST and I have written about this, but a solution is yet to be agreed. If we agree on the theory how can we take this forward in a way that benefits savers, aligns to wider pension industry goals and saves the government instead of costing them? Good question – we may have a solution!

The 25% breakthrough

The highlight of our podcast conversation came when Webb reframed how we look at the standard 25% tax-free lump sum.

He says: "Most people are going to take 25% tax-free cash at retirement anyway. They aren't using that specific portion for an annuity or sustainable drawdown income... So, we have that bit to play with! Taking a portion at age 30 or 35 to secure a home deposit generates a tremendous return, because what actually matters in retirement is income after housing costs."

Webb pushed back against industry purists who treat early access as a moral failing: "There is this morality about 'you should tie your money up and it's good for you' and that it would just be lax modern youth dipping into their pensions. It is just financially savvy to have a house... We just need to be a bit more chill about it!"

8% AE renting versus 12% AE homeownership

To see the real-world impact, consider a worker starting at age 25 on a £30,000 real salary over a 43-year career to retirement at age 68:

• Scenario A (the current system): 8% auto-enrolment (AE) minimum. No early access; member rents privately for life.
• Scenario B (adequacy + housing access): AE rate raised to 12%. At age 35, the member accesses 25% of their accumulated pot (around £11,200, which paired with a partner or LISA creates a viable deposit) to buy a home.
  
  

Assumptions: 4% real investment growth, flat real £30k wage trajectory.

Even after accounting for lost compound growth on the early withdrawal (around £41,000 over 33 years), Scenario B leaves the saver with a larger pension pot and a paid-off house – a net wealth swing of nearly £590,000.

Ghost money and dinner party banter

During the podcast, Webb shared a brilliant snippet from a recent consumer focus group on contribution rates. One saver described their pension deduction as "ghost money" – money they never see, so they simply budget around whatever hits their bank account.

Connecting that so-called ghost money to a tangible benefit – such as buying a first home in their 30s – transforms how young workers view pensions. Instead of an abstract lock-up for age 68, pensions become an active vehicle for financial well-being today.

I joked with Webb on air that I don't get invited to many dinner parties because I advocate for pensions so passionately! (My partner is a photographer who takes pictures of famous people—he's the one who gets the invites). But if we want pensions to be a topic people actually want to talk about around the kitchen table, connecting them to housing security is how we do it.

Managing the risks

As we discussed in the episode, innovation requires guardrails:

• Preventing pot depletion: Early housing access must be tied to raising AE rates to 12%. Under 8%, pots remain too small to split safely.
• Avoiding house price inflation: Early access must be strictly targeted – limited to first-time buyers and primary residences to avoid inflating prices.
• Conveyancer gateway: Funds should never pass into a personal bank account. Transfers must go directly from scheme administrator to the conveyancing solicitor upon exchange.

Time to view savings holistically

If pensions people aren't too precious about pensions, but are precious about savings, we can help members build the right mix of emergency cash, housing equity, and long-term income. Housing security is retirement security. It's time we widen our lens.

Alison Hatcher is chief client officer at Vidett

Listen to the full Trustee Voice podcast episode with Alison Hatcher and Steve Webb here to hear the full discussion on dinner party conversations, ghost money, and why the industry needs to get "a bit more chill" about early access.

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