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Home Personal Finance

Pension and housing policy is a war on Britain’s young

newszabi@gmail.com by newszabi@gmail.com
July 6, 2025
in Personal Finance
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Pension and housing policy is a war on Britain’s young
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The author is the Conservative MP for Tonbridge

For hundreds of years, this nation has upheld an unstated social contract. That every technology will create a greater future for the following. That deal is now damaged. That is the results of a long time of coverage selections which have systematically benefited one technology — the infant boomers — initially stimulating the economic system however now choking it as wealth is transferred from younger to outdated. Two dangerous insurance policies specifically have influenced this trajectory. The primary was a set of regulatory adjustments over 20 years in the past that in impact compelled pension funds to liquidate their investments in home UK firms and substitute them with authorities bonds.  

That call destroyed the core social contract that makes pensions work: the concept that the outdated revenue from the vitality of the younger. As an alternative of fuelling dwelling minds and concepts, wealth has been channelled into the lifeless hand of the state by gilts. Right now, over 60 per cent of personal sector outlined profit pension property sit in gilts, with simply 1 per cent in UK equities. This has starved British enterprise of long-term home capital, driving revolutionary firms like Arm Holdings and DeepMind to hunt overseas funding, siphoning the wealth they create abroad.

Second, and much more detrimental to youthful generations, is a set of insurance policies which have artificially created a extremely damaging cult of housing. For a lot of a long time, too few homes have been constructed within the UK. Thanks partly to the tax system, housing has been remodeled from a spot to dwell and lift a household right into a de facto tax free retirement fund that excludes the younger. Greater than 56 per cent of the UK’s whole housing wealth is owned by these over 60, whereas dwelling possession amongst these beneath 35 has collapsed to simply 6 per cent. This has had profound social and financial penalties as fewer folks marry and have kids, additional impairing long-term demographic regeneration. The end result? Greater than 80 per cent of the expansion in actual per capita wealth over the previous 30 years has come from appreciation of actual property, not from the monetary funding that powers the economic system.

Michael Tory, co-founder of Ondra Companions, has argued that this capital misallocation has created a self-reinforcing cycle, weakening our nationwide and financial safety. With out productive capital, we’re wholly depending on overseas funding and imported labour, straining housing provide and public companies. These distortions can solely be corrected by a rebalancing of our nationwide capital allocation that places long-term nationwide curiosity above slender electoral calculation. Which means levelling the funding enjoying discipline to cut back the taxes on these whose long-term financial savings and investments in Britain’s future truly make use of folks and generate development. Together with constructing extra homes and stricter migration controls, this may convey dwelling possession into attain for youthful generations.

Leaving property as the one lifetime capital positive aspects exemption has distorted UK capital allocation. Non-public residence aid, which exempts main residences from taxation and was costed by the Treasury at over £30bn within the 2023-24 tax 12 months, ought to now not be sacred. Reconsidering PRR would allow the wholesale rebalancing we’d like, together with a lifetime capital positive aspects exemption on investments in UK firms, eliminating stamp obligation on share transactions and elevating the UK company-supporting Isa contribution restrict. This might incentivise British households to spend money on companies quite than buildings.

Lastly, the pension system requires basic reform. Channelling extra of our nation’s financial savings again into powering UK firms, know-how and entrepreneurs would gas the economic renaissance our economic system requires and generate higher long-term returns for pensioners too. A lot of this received’t be in style. The present system serves many vested pursuits. But when we would like the economic system to develop we will now not defend frozen property; the nation’s future is on the road.

 



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