Treating pensions as assets rather than income threatens their true purpose: providing dignity in retirement.
The debate about the Government’s plans to charge inheritance tax on pensions has highlighted how some people see a pension as an asset rather than a way to provide for their golden years. To me, this feels similar to the way the housing market has come to work – treating a home as an investment instead of as, well, a home. I wonder how much this mindset is playing out in trustee meetings and investment committees. To what extent is it part of fiduciary duty to consider that some members may want to pass on their pension as wealth, rather than spend it on themselves?
This shift in perspective will have been accelerated by the transition from defined benefit to defined contribution pensions. DB schemes naturally frame retirement provision as income – a regular payment that continues for life, much like the salary it replaces. In contrast, DC pensions, with their pot of money that can be accessed in various ways, make it easier to view pensions as assets to be maximised and potentially passed on. The prominence of fund values in annual statements, important as they are for transparency, can inadvertently reinforce this ‘asset-first’ mindset.
When we reduce pensions to investment vehicles, or houses to appreciating assets, we obscure their essential role in creating a stable, dignified society. A pension isn’t just a number in an account; it’s the thing that, after decades of contribution to society, means you won’t have to choose between heating and eating. It’s the idea that retirement won’t mean poverty. It’s about maintaining independence, staying connected with friends and family, and continuing to participate fully in society.
Similarly, a house isn’t primarily an inheritance to pass down or an investment to flip. It’s where children take their first steps, where families gather for meals, where communities form, one kitchen table at a time. It’s the foundation of stability that allows people to put down roots, participate in their community, and plan for the future. When we prioritise property as an asset class, we risk forgetting these fundamental social benefits.
And I don’t think it’s that controversial to suggest that treating homes as assets is a big part of the ‘housing crisis’.
The financialisation of these basic needs has created perverse incentives. When housing becomes an investment class, we build for profit rather than people (or we don’t build at all – because landbanking makes more money). When pensions become vehicles for wealth transfer, we risk forgetting their fundamental purpose: ensuring dignity in later life. Even if inheritance tax doesn’t affect most pensioners, the fact that the industry (and the Daily Mail) talks (and complains) about the idea further devalues the overall idea of pensions as being something worth doing.
As we debate housing policy and pension reform, we must return to first principles. What if we evaluated success not by asset appreciation or the size of inheritance, but by the number of people living securely throughout their retirement? What if our metrics focused not on property values or fund size, but on community stability and quality of life in later years? This might mean rethinking how we measure and report pension scheme success, moving beyond pure financial metrics to consider outcomes in retirement.
This line of thinking connects to the debate on responsible investment. That maximising a pension pot should be balanced with the good or ill that the associated investments cause. Because the quality of the world around us is what really matters, not just how much we have available to spend in it.
The challenge ahead isn’t just economic. It’s philosophical. We need to reclaim these institutions’ original purpose: meeting essential human needs. Only then can we build policies that truly serve everyone, not just those looking to accumulate wealth. For those of us working in pensions, this means keeping the focus firmly on providing security and dignity in retirement. For those working in housing, an even bigger rethink is probably required.