Live in Tamworth? About to Retire and Privately Rent? You Could be £4,100 a Year Worse Off!

You read the personal finance pages of the newspapers and it all seems to be the impending pensions crisis … where people aren’t saving enough for their retirement. But it’s not the lack of Tamworth peoples’ future pension incomes that are my immediate concern. The fact is that so many of the future retirees in Tamworth over the coming decade, who never bought their home in the Millennial years of the 1990’s and 2000’s, will have to make some tough decisions regarding what house they live in when they retire anytime between now and 2038.

In Tamworth, there are 488 privately rented households, where the head of the household is between 50 years and 64 years of age (meaning they will be retiring anytime between now and 2038). They are working now and easily paying the rent, yet what happens when they retire?

A Tamworth retired couple, who currently privately rent and who have paid their fully qualifying NI stamp over the last few decades are likely to retire with the couples State Pension of £1,091 per month plus a tiny bit of private pension if they are lucky. Given that the average rent in Tamworth is £741 a month – a lot of that pension will be lost in rent. This means taxpayers will have no alternative but to step in and top up the rent payments with Housing Benefit, yet…

The maximum housing benefit for a couple in Tamworth is currently £393.90 per month … leaving a significant gap when you consider the average rent in Tamworth is £741 per month

It is most people’s opinion that retirees are either council tenants or own their home outright. Looking at these figures though, it looks like both these ‘mature’ private renters could be having to make some decisions on their lifestyle and where they live, possibly looking at downsizing the home they rent to make things more affordable in their old age. Also, the government will be in for a horrible surprise as more of Tamworth people retire and continue to rent from a private landlord. Numerous Tamworth private renters, with little or no savings, will have to rely on Housing Benefit, which will put greater pressure on the public purse.

The average Tamworth retiree will need to find £4,165 pa to stay in their privately rented home after retirement

A recent report from Scottish Widows suggested that 1 in 8 OAP’s will be privately renting by 2032, up from the current one in 15.47 OAP’s whom currently private rent (or 6.47%). In fact, in that report they said the equivalent of more than one-third of the whole annual NHS budget would be spent on Housing Benefit for OAP’s in retirement living in private rented property.

What does this mean for mature Tamworth homeowners? I see many using equity release schemes to stay in their homes to pay for a better retirement and others more open to downsizing, selling their large home to a family that needs it and moving into a smaller apartment or bungalow … yet lets be frank – they aren’t building bungalows in large numbers in Tamworth anymore.

And for the Tamworth landlords? Well with the younger Millennials showing no appetite in jumping onto the homeownership bandwagon anytime soon, it can only result in the demands on the buy to let market from Tamworth tenants rising substantially. Of course, many Millennials will inherit money from their home owning parents in the coming few decades, yet a lot won’t as it will be spent on nursing home care and any leftovers (if any) split between siblings.

The solution to all this is to build more homes, of course. Last year we created/built just over 217,000 households in the UK, up from a post Millennial average of just under 150,000 households a year. We need to get back to the building booms of the late 1960’s and early 1970’s when on average 300,000 households were built … but back to reality … that won’t happen so it looks like we are turning into a nation of renters, which is of course good news for Tamworth buy to let landlords!

For those retiring in post 2050/2060, there is better news as official reports suggest those retirees will enjoy a State Pension approximately similar to today’s pensioners with auto-enrolment into top-up private pensions through their employer.

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Tamworth’s ‘Millennials’ set to inherit £329,700 each in property!

That got your attention … didn’t it!

But before we start, what is Generation X, let alone Generation Z, Millennials, Baby Boomers  … these are phrases banded around about the different life stages (or subcomponents) of our society. But when terminologies like this are used as often and habitually as these phrases (i.e. Gen X this, Millennial that etc.), it appears particularly vital we have some practical idea of what these terms actually mean. The fact is that everyone uses these phrases, but often, like myself, they are not exactly sure where the lines are drawn …until now…

So, for clarity …

Generation Z:              Born after 1996

Millennials:                 Born 1977 to 1995

Generation X:              Born 1965 to 1976

Baby Boomers:            Born 1946 to 1964

Silent Generation:       Born 1945 and before

My research shows there are 8,064 households in Tamworth owned by Tamworth Baby Boomers (born 1946 to 1964) and Tamworth’s Silent Generation (born 1945 and before). It also shows there are 15,494 Generation X’s of Tamworth (Tamworth people born between 1965 to 1976). Looking at demographics, homeownership statistics and current life expectancy, around two-thirds of those Tamworth 15,494 Generation X’s have parents and grandparents who own those 8,064 Tamworth properties.

… and they will profit from one of the biggest inheritance explosions of any post-war generation to the tune of £1.726bn of Tamworth property or £166,970 each but they will have to wait until their early 60’s to get it!

However, it’s the Millennials that are in line for an even bigger inheritance windfall.

There are 11,299 Millennials in Tamworth and my research shows around two thirds of them are set to inherit the 11,612 Tamworth Generation X’s properties. Those Generation X’s Tamworth homes are worth £2.485bn meaning, on average, each Millennial will inherit £329,700; but not until at least 2040 to 2060!

While the Tamworth Millennials have done far less well in amassing their own savings and assets, they are more likely to take advantage of an inheritance boom in the years to come. This will probably be very welcome news for those Tamworth Millennials, including some from poorer upbringings who in the past would have been unlikely to receive gifts and legacies.

However, inheritance is not the magic weapon that will get the Millennials on to the Tamworth housing ladder or tackle growing wealth cracks in UK society, as the inheritance is unlikely to be made available when they are trying to buy their first home…but before all you Tamworth Millennials start running up debts, over 50% of females and around 35% of men are going to have to pay for nursing home care. Interestingly, I read recently that a quarter of people who have to pay for their care, run out of money.

So, if you are a Tamworth Millennial there potentially will be nothing left for you.

Of course, most parents want to give their children an inheritance, the consideration that what you have worked genuinely hard for over your working life won’t go to your children to help them through their lives is a really awful one … maybe that is why I am seeing a lot of Tamworth grandparents doing something meaningful, and helping their grandchildren, the Millennials, with the deposit for their first house.

One solution to the housing crisis in Tamworth (and the UK as a whole) is if grandparents, where they are able to, help financially with the deposit for a house. Buying is cheaper than renting – we have proved it many times in these articles … so, it’s not a case of not affording the mortgage, the issue is raising the 5% to 10% mortgage deposit for these Millennials.

Maybe families should be distributing a part of the family wealth now (in the form of helping with house deposits) as opposed to waiting to the end… it will make so much more of a difference to everyone in the long run.

Just a thought?

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