The PPI and the Pensions Commission  need to find solutions to the problems they have uncovered.

After reading the 37 pages of this report (thanks for the prompt Ben Leadbetter) , I am  even more convinced that solutions do not lie in increasing the value of the pot but by paying pensions as deferred pay.

This makes a lot of sense. The PPI report does indeed link pensions and renting. If the capitalised cost of renting averages £200,000 and the average pension saving pot is £154,000, then pensions won’t cover rent. The PPI is working from the Pensions Commission interim report but is clearly pushing for solutions

Through new modelling and analysis, it highlights the interconnected challenges of rising housing costs in retirement, financial vulnerability within different household structures and the strengths and limitations of the current automatic enrolment system. The findings identify where existing policy may be falling short and where targeted reforms could have the greatest impact, and for whom, particularly for lower-income workers and renters.

But when it comes to what is needed , it talks a very old fashioned language.

I’m going to have to point out that rent is paid monthly – and pension income is paid monthly. Putting any amount of capital in people’s bank account is giving people the  problem – the nastiest hardest problem in finance.

The problem is more acute down south and especially in the south east

The report is very good on housing , explaining that renting is a regional problem

But it’s not so good on pensions. It cannot find a way to increase pots tomorrow without depriving people of income today. This simple equation does not really get covered. We know however that the problem with demands on income from tenting will increase over the next 20 years as ownership amongst the lowest income decreases

There is a need for solutions as well as re-statement of the problem

The PPI is now supported by the ABI and I don’t think the PPI will look beyond the current system of retirement saving for answers.

But I think that with limited funds to pay for pensions and with pensions and not pots likely to arise from pensions once CDC and Guided Retirement leading to income and not capital for savers, the answer can be addressed by how saving becomes the income.

If people thought of saving for a retirement wage to pay the rent in later life, they would at least have a concept that made sense. Having a pot of money is mysterious but rather abstract if you are struggling to pay the bills.

pot

I am looking to the PPI and to the Pensions Commission to turn focus on solutions to the problem that has emerged as we have given people freedom from pensions and promoted the pot.

This report’s conclusions center around us paying more into the pot and that is a broken record. The chart below is becoming  a cliche.

The reform options considered all focus on getting the poor to pay more into their pots

Of the nine conclusions the exhaustive  report reaches after 37 pages of tight-fonted analysis, nine are based on making higher contributions (to various groups).

I hope that we can move the solution for employers and for workers, for self employed and for pensioners, towards income and away from reliance on a pot.

Talking of pensions as  “deferred pay” should make sense to those struggling to pay rent. Older people ought to be able to pay household costs and have some money left over to enjoy the time they have earned.

For employers and employees pensions need to be thought of as a wage in retirement