We should all be worried about a number of conversations regarding the property market that are going on in the corridors of power.
These concern whether buy-to-let investments should be allowed in pensions, and whether savers should be allow to dip into their pensions to pay for a house deposit.
Separately, the lobby group for equity wants personal housing wealth to be included on a new database that will show every individual’s total pension savings.
Finally, there is a suggestion from a former adviser to George Osborne that mortgage lending caps should now be lifted.
For each case there is a compelling argument, but together they threaten to undermine the great progress made in pension saving. And, once you strip away the rhetoric, they are all just about keeping the property gravy train going.
We have such a crackpot relationship with housing in this country.
Doing well in the property market wins praise, even though the vast majority of us have done nothing to earn it.
It is one of the most dysfunctional markets, and is constantly propped up by government-backed incentives, from right-to-buy and mortgage interest relief under Margaret Thatcher, to Gordon Brown’s HomeBuy Direct and Help to Buy, introduced when Mr Osborne was chancellor.
Every decade or so we have an affordability crunch, when prices climb so fast that banks and building societies begin to overlook lending constraints to maintain the number of loans – all under the pretence of helping first-time buyers.
In 2007, we had lenders offer seven times income and 125 per cent loans; today, we have 40-year mortgage terms and the rise of the guarantor loan. Anything, but anything, to avoid a fall in house prices.
Meanwhile, despite widespread pensions mis-selling in the 1990s, the death of final salary schemes, and the chronic mismanagement and recent collapse of some company plans, retirement saving is in robust health – largely because each of us has been put in control of our future.
Automatic-enrolment into a pension will turn out to be one of the greatest political strategies of recent times, bringing retirement savings to more than 10m who had none previously.
Figures from the OECD group of developed nations show that Britain’s pension fund assets add up to more than the size of the economy, at 105.5 per cent of gross domestic product.
Only Australia, Iceland, Switzerland, Holland and Denmark do better, the latter with a spectacular 204 per cent. Pensions have their problems, not least the confusion over taxation, but private saving is doing pretty well in Britain.
Given the vast wealth in our retirement funds – about £2.9tn – it is little wonder those in the housing sector who are worried about the market stagnating should view this as a pot to be tapped.
But that is short-termism in the extreme, swapping investment for debt.
These high-level conversations have to stop now. The answer to unaffordable homes is not to let people borrow ever greater sums, nor to allow savers to spend their retirement funds on them.
If we care about helping people buy a home, we are all going to have to accept that a fall in prices is the best medicine.
Goodness me, Neil Woodford keeps getting himself in a right old pickle at the moment. Just a few weeks ago he was busy shuffling three unlisted stocks from his portfolio onto the Channel Islands Stock Exchange.
The idea was that his holdings in each of these firms would be then counted as listed. This is not the first time someone has done this – but it is highly unorthodox. Of course, the stocks are not really proper listed stocks, no one is buying and selling, so they are not being traded.
And then, what is this? It turns out that the Channel Islands Stock Exchange was not quite so happy with that arrangement after all.
What a mess. All because guidelines say he must not have more than 10 per cent of his fund counted as listed. The reason this proportion has grown so much is because of the vast redemptions on his equity fund.
What is more, the sentiment seems to be that Mr Woodford is well positioned for Brexit. But with Brexit looking further away every day, the day people think his portfolio will be suddenly transformed gets pushed back. He really cannot catch a break.
What do plumbers and financial advisers have in common?
One of my favourite businesses is Pimlico Plumbers. Their staff are polite, honest, completely upfront. Their fees are utterly transparent, though not cheap.
Their service is brilliant. Despite the fact the firm’s boss Charlie Mullins is a bit annoying, they are rather wonderful.
There is a lesson here for all businesses. Transparency over charges and brilliant service mean customers feel happy paying higher fees. Sadly all too often in financial services, the transparency and the service are all too lacking, while the high fees remain.
James Coney is money editor of the Sunday Times
Source: FT Adviser