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Pensions & Retirement

Gen X faces retirement shortfall despite higher buy-to-let ownership – Rathbones

A survey for Rathbones found Gen Xers are less likely to hold ISAs (66% versus 78% for Baby Boomers) or other investment accounts (45% versus 52%).

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Gen X faces retirement shortfall despite higher buy-to-let ownership – Rathbones
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Generation X is at risk of an inadequate retirement, despite being more likely to own buy-to-let (BTL) property than Baby Boomers, according to analysis from Rathbones. 

Nearly twice as many Gen Xers own BTL homes compared to Baby Boomers (17% versus 9%), but they are less likely to hold tax-efficient investments such as ISAs or other investment accounts.

The Pensions Commission’s interim report highlighted that many Gen Xers missed out on final salary pensions and early auto-enrolment. 

A survey for Rathbones found Gen Xers are less likely to hold ISAs (66% versus 78% for Baby Boomers) or other investment accounts (45% versus 52%).

Rebecca Williams, financial planning divisional lead at Rathbones, said: “Many Gen Xers are sleepwalking into retirement with far less financial security than their parents. 

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“They came of age as defined benefit pensions were disappearing and have since faced years of stagnant wage growth and repeated financial shocks, making it harder to build robust, long term savings.

“This cohort also represents a large part of the ‘sandwich generation’, juggling day to day costs while supporting both ageing parents and children.”

Williams added: “As a result, boosting retirement savings can be difficult amid ongoing financial pressures.

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“It’s perhaps no surprise that property – particularly buy to let – has been seen as an alternative route to funding retirement. But relying on property as a pension can leave retirees overly exposed to a single, illiquid asset at a time when flexibility is most needed.”

Rathbones’ analysis showed that UK house prices rose by 6.7% a year between 1980 and 2016, but since 2016, growth has slowed to 3.7% a year. 

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In London, property prices have only grown by 1.3% a year since 2016.

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Over the same period, £100 invested in London property in 2016 would now be worth £111, compared with £174 if invested in equities.

Isabella Galliers-Pratt, senior investment director at Rathbones, said: “The conditions that fuelled the property boom have long since changed. 

“Property is less flexible than pensions or investments, and rental income can be less predictable—particularly as higher interest rates, tax changes and rental reforms have squeezed returns and added complexity for landlords. 

“The idea that property is always a ‘safe bet’ no longer holds true in many parts of the country.”

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Galliers-Pratt added: “By contrast, pensions benefit from upfront tax relief, tax efficient growth and access to diversified investments, making them a more structured and effective way to build long term retirement income. 

“A more resilient approach typically involves balancing different asset classes, ensuring pensions, investments and property work together to meet income needs and align with personal risk tolerance.”

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