Leave property out of pensions dashboard

We are utterly obsessed with property prices. What is more, our attitude towards property has led to many people to make some very bad financial choices.

And these are just two reasons why housing wealth should not be included in the new pensions dashboard (another more obvious reason being: a property is not a pension).

Of course, it is the Equity Release Council that is pushing the idea that property wealth should be part of this new service.

It is not that I do not think equity release should in future play a key part in retirement planning. Quite the contrary, with huge questions still over social care costs, for many people it will be a vital means of securing extra income in later years.

It should be used as a spur to save more, and help set a target for retirement. Having housing wealth included in there gives a false picture.

With proper independent financial advice that looks at all assets and savings, transparent fees and charges, and family members at the heart of the discussion from the start, equity release can be incredibly valuable.

But wrapping property up with pensions sends the wrong message. It gives a false impression of your actual savings, and that is particularly poisonous in a pension dashboard.

There are so many questions about how you value the asset.

What will the value on the pensions dashboard be? Will it be what is it worth today?

Will it be the price minus the remaining mortgage? If so, then it is unlikely to take into account the actual price plus interest that you are paying on it.

Assuming what the value of a home will be in 20 years time is also incredibly dangerous.

Your residential home is firstly something you have to live in, so selling is at the whim of supply and demand, and in many cases the foibles of one or two people bidding for it.

Then you have got to factor in other costs.

Many people today find downsizing incredibly costly because of stamp duty; they do not want to pay the cost themselves and often cannot find anyone that wants to buy their home because of the tax.

For that matter, it seems likely to me that stamp duty is actually creating a mini boom in equity release.

Why pay the one-off upfront tax charge to downsize, when you can spread out a separate cost across your remaining days with a lifetime mortgage?

The point of a pensions dashboard – for all its failings, which I have gone through here before – should be to give a completely rounded picture of your savings.

It should be used as a spur to save more, and help set a target for retirement. Having housing wealth included in there gives a false picture.

Rather, what is needed is another separate account that combines everyone’s assets in one place.

Because of the dawn of open banking (albeit a very slow dawn), we are at a point where it is not inconceivable that every bit of money you have, and debt, can be seen in one location.

That is a brilliant planning tool for consumers – and has the potential to be a wonderful asset for financial advisers too.

Not having to do all the legwork should mean more time for what advisers should be real specialists at: retirement and tax planning.

Dealing with data

I had to laugh at the own-goal digital bank Revolut caused when it put up a London Underground poster claiming to know how many singletons ordered a take-away meal for one on Valentine’s Day.

Of course, among a certain demographic, teasing people is beyond the pale and so there was Twitter backlash.

Customers of these digital start-ups are total converts to the cause.

You cannot utter a bad word against the bank without being attacked. So even when Monzo made the incredibly dodgy move of suggesting customers rack-up debt to take part in capital raising for the bank, many customers defended the actions.

But I am less concerned about the advertising boo-boo and more worried about what these banks are really about: data. They do not care about banking, they are just here to make money from our information.

Preparing for anything

I loved a piece in the Financial Times’ Serious Money section that looked at financial mistakes and gave money management tips for women.

As well as great information on savings and pensions, it included a “f*** off fund” – savings for when you need to leave your partner.

Now that really is planning for every eventuality.

James Coney is money editor at the Sunday Times