Property: a national obsession

Property shows on TV, the drumbeat of media chatter around house prices, the mortgage lens routinely applied to rates shifts – these are all common cultural factors that underline an interesting truth in the UK. For many Britons, the idea of home ownership has become central to how they think about their financial lives.

For decades, successive governments, of all colours, have helped to create an environment where property has become something of a national obsession. From stamp duty holidays to mortgage support schemes, an array of policy tools have been devised and deployed to ensure the housing market is supported.

And it’s not just politicians. The ‘bank of mum and dad’ put up around £17 billion each year to help their children, according to the Institute for Fiscal Studies, with property the leading reason.

Taking charge of our financial lives and retirement planning

We have seen spikes in recent years, not least the rise of the armchair trader during lockdown. We see it in our business, where growing numbers of customers are taking charge of their financial lives and retirement planning. But none of these moments in time yet come anywhere close to the broad cultural movement that has built up around property and home ownership and which we need to help build the nation’s financial resilience.

With the state pension age edging up, pressure on how far governments can go to support an ageing population, and retirement provision increasingly resting on the individual, we are now looking at a future where peoples’ finances fall far short of what is required to give them the retirement they desire.

In that context, we need to think about how we might develop the same enthusiasm for a ‘Savings Ladder’ where people can see the benefits of starting early, building their pot, investing to grow it, and ultimately delivering the retirements they want and deserve.

Albert Einstein articulated it best, reportedly describing compound interest as the “eighth wonder of the world”, to explain how returns can snowball over time. The stock market has the potential to do much of the heavy lifting for us over the long term. With dividends stripped out, the FTSE All Share is up just 27.8% over 30 years to 31 December 2023 versus 258.6% with dividends reinvested*, even when factoring in inflation.

Another critical step to building the savings culture we need is to substantially increase, and ideally double, the minimum payment thresholds into defined contribution pensions. The politics of this is difficult, but as many look enviously to models in countries like Australia, there aren’t many people in the industry who don’t believe that this is a nettle that needs to be grasped.

abrdn is a business that stretches from asset management, where we look after the investments of millions of people, to supporting a large proportion of the UK’s financial advisers, to offering one of the leading direct investing platforms on the market. It’s certainly in our interest to see more people plan, save and invest for the future, but it’s also a critical challenge for our society. If we can encourage more people to get on the Savings Ladder that will be good news for everyone.

(*Source: abrdn using Haver Analytics, with returns adjusted for inflation using the UK Consumer Price Index. Past performance is no guide to the future. The value of investments and the income from them can go down as well as up and investors may get back less than the amount invested.)

Read more about abrdn’s research on the gap between people’s views on investing in property compared to pension saving, and five proposals to help drive change in ‘The Savings Ladder. A manifesto to get Britain investing’.