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September 4, 2025 16 mins

What will give you a stronger financial future? Buying a home or putting extra into your pension so you have enough to retire one day. With high property prices and changing retirement plans, millennials and Gen Z face a tricky financial dilemma.

In this episode, Iona Bain sits down with Claer Barrett, Consumer Editor at the Financial Times and host of the Money Clinic podcast, to unpack the debate around investing in a property and building a good pension pot.

They explore why home ownership feels like the top priority for many and the benefit longer term of putting more money into your pension. Claer also shares practical insights on mortgage terms, overpayments, workplace pension contributions and the power of starting early.

Whether you’re dreaming of your own home, being mortgage free or a retirement filled with treats, this conversation offers clarity, encouragement and steps to make your money work harder for your future self.

You can watch episodes on L&G’s YouTube channel

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You can play the podcast and find other useful content on L&G’s website:

https://www.legalandgeneral.com/podcasts/a-little-bit-richer

Follow Claer Barrett on Instagram.

You can find information on the Retirement Living Standards here:

Home - Pensions UK - Retirement Living Standards

Iona and her guests share their own personal thoughts and opinions in this podcast. These might be different from L&G’s take on things. They give financial guidance for a UK audience that’s relevant at the time of recording. It’s general best practice, not the kind of personalised advice you’d get from a financial adviser.

See omnystudio.com/listener for privacy information.

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Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Iona Bain (00:01):
Hello and welcome to A Little Bit Richer, with me,
Iona Bain, brought to you by legal in general. Now,
there's a lot of debate online about whether you should
prioritize getting on the housing ladder or perhaps put off
the property dream to save more into your pension. With
house prices rising and traditional retirement paths shifting, millennials are
stuck in a financial tug of war. Should we prioritize

(00:23):
our pension contributions so we have a more comfortable retirement
or buy a home so we aren't paying rent in
our later years? Well, I can't think of anyone better
to talk to today about this topic than consumer editor
at the Financial Times, Claer Barrett. At the FT, Claer
writes her weekly Serious Money column, presents the Money Clinic
podcast and is behind the newsletter, Sort Your Financial Life

(00:47):
out with Claer Barrett. She's also the author of the
bestselling book, What They Don't Teach You About Money. Welcome, Claer.

Claer Barrett (00:54):
Oh, thanks for having me, Iona.

Iona Bain (00:56):
Claer, can you set the scene and explain why this
debate around property versus pensions has come about?

Claer Barrett (01:04):
I think it's always been there, because saving for retirement,
saving for a property, ask any young person at any point
over the last 20 or 30 years, " Which one are you going
to prioritize?" Of course it's going to be property because
we want to get on the housing ladder. We've seen
what house prices can do and the impact of owning
an asset, which could rise in value. No guarantees, of

(01:26):
course, that that's going to keep happening, certainly keep happening
at the same rate in the future, but it's been
a one- way escalator for generations past. And you can
also tell your landlord to do one. And I think
for many people it's that that's the motivation, the insecurity
of living in rented accommodation as well as the huge
cost. Maybe you're living with your parents for longer in

(01:48):
order to save up for a property. These are all
factors that are pushing young people towards prioritizing property over
retirement, which seems like a very, very distant dream.

Iona Bain (02:01):
And when it comes to pensions, a lot has changed
over the past 30, 40 years. Now, the responsibility is
being put much more onto the individual, isn't it, in
terms of saving for retirement?

Claer Barrett (02:13):
Yeah, in the good old days, the sort of pension
that you would retire with would give you an income
like a salary every year of your life until you
died. Nowadays, all of that responsibility for the vast majority
of jobs, unless you work for the public sector, teaching,
civil service, doctors, policemen, fire service, you'll still have one

(02:36):
of those more generous final salary pensions. If you're working
in the private sector, it's got a much less generous
pension system, defined contribution is what it's known as. So much jargon in the
pension as well. But what it essentially means is you're
paying him money, your employer's paying him money. You've still
got a heck of a lot of tax advantages if
you're saving money into a pension, but the end of

(02:57):
the day you're going to end up with a pot
of money that you've saved and invested, and hopefully grown
over the years, but it's up to you to decide
what you want to do with it. So you've got
to manage that money for the rest of your life.
Now, this is where the pension versus property debate gets
a bit more interesting, because of course your biggest expense

(03:18):
right now, if you're somebody who's young and working, is
likely to be your rent or your mortgage. Now, if
you manage to get on the property ladder, mortgage payments
nowadays a lot more expensive 'cause house prices have risen,
but eventually you are going to pay that mortgage off,
you would hope before you retire. And then, that's going
to be a big cost that comes out of your

(03:39):
budget. Whereas if you've never managed to get on the
property ladder, you're going to have to fund a rent
from any money that you save into your pension. So,
this is a real concern to people who are maybe
a few decades out from retirement, haven't yet managed to
get on the property ladder, and it just adds urgency to

(04:00):
this problem.

Iona Bain (04:02):
So saving for property can not just benefit you in
the here and now. It could actually help with your
retirement as well, but are there circumstances in which people
might be better off renting and where there maybe isn't
that urgency to save up money for a home?

Claer Barrett (04:18):
Well, I means so much of this comes down to
your individual circumstances, but I think that the Bank of
Mum and Dad really are the big unspoken in this
conversation. Pretty much everyone who is in their 20s or 30s, if
they are getting on the housing ladder, are going to
have some kind of help from their families. May not
be Mum and Dad, it might be Gran and Granddad,
but nevertheless, I think L& G has worked out in

(04:39):
the past, the Bank of Mum and Dad is something
like the seventh or the eighth- biggest mortgage lender technically
in Britain if you were to rank them among them.
Now, you might think, " Okay, well I'm not ready to
buy yet." It's a lot of responsibility that comes with
owning a home.

Iona Bain (04:53):
And you can make the wrong decision, buy the wrong
place at the wrong time, and make a big loss.

Claer Barrett (04:58):
Yeah, and also the transaction costs. If you're not sure
about what area you want to settle in and live,
if you buy somewhere and then sell it and buy
again, you're going to be hit with two lots of
stamp duty. So, it doesn't pay to hurry when you're
making decisions about property. But increasingly younger people, Gen Z
as they're known, are thinking more about investing first rather

(05:20):
than saving in cash and saving for a property. Because they
know if they haven't got any help coming from their
family, just saving in cash and getting the interest on
a cash savings account is not going to be enough
to get them there. So I've seen a couple of
surveys come across my desk, big surveys in the last
couple of months at the FT that have said that
Generation Z are the most active generation when it comes

(05:44):
to investing money in the stock market, using stocks and
shares, ISAs, so it's still tax efficient. And hoping that
in the long term that will give them more bang
for their buck to help them get on the property.
One other little factette that I'll slip in, 'cause this
is something that I used when I got on the
property ladder in my late 20s, there's a government scheme

(06:06):
called the Rent a Room Scheme. If you let out
a furnished room in your home, it doesn't have to
be permanently to a lodger, although that's what I did,
you could do Airbnb and be renting it out during
the week, for example. You can make up to seven
and a half thousand pounds tax- free from doing that

(06:26):
per tax year, April to April, and best of all,
you don't even need to Claer it on a tax
return. So, your property could be earning money for you
if you've got a spare bedroom. And that's something that
helped me get over the line when I was doing
all of my sums and working out what mortgage, what
property, what area I could afford to live in.

Iona Bain (06:47):
But also, if you have then got on the property
ladder and you are able to use that kind of
scheme, you could put that cash into your pension, perhaps.

Claer Barrett (06:55):
Oh.

Iona Bain (06:55):
You see?

Claer Barrett (06:55):
Very good, Ms. Bain.

Iona Bain (06:57):
And also, saving for a property doesn't just help you in
the short term. It can also help you in retirement.

Claer Barrett (07:04):
It can. So, all of the main calculations of retirement
living standards, they've come up with these rules of thumb
to give people an idea of how much money they
would need to aim to provide for themselves every year
in retirement to have a basic standard of living, which
is basically the state pension plus something else, an intermediate

(07:25):
and much more affluent style of living. But all of
these calculations assume that you've paid off your mortgage. Now,
the most popular mortgage term used to be 25 years,
now it's 30 years. It's also possible to get a 40-
year term if you're a young person. Now, it's great you
can stretch out those payments and make them more affordable

(07:46):
so more people can get on the ladder, but ultimately,
over the course of 35, 40 years, you're going to be
paying back an awful lot more interest. So that's compounding
again, but in reverse. Compounding working against you. So, the
other thing that you need to look at, especially as
your career progresses and your salary starts to rise is, "
Is it going to be worth it for me to

(08:08):
do an overpayment on my mortgage? And am I going
to get more bang for my buck doing that or
making an overpayment into my pension?" If you are in
that lucky position and you have got a bit of
extra money that you think you could sink into both.
And ultimately, it comes down to tax. As I said
before, if you're somebody who's earning over 50,000 pounds or
certainly somebody earning over 100,000 pounds, then almost certainly the

(08:32):
pension will give you the bigger bang for your buck.
But equally, if you are making even a small overpayment on your
mortgage over time, particularly if there's two of you and you're
both doing an extra 100 quid a month to pay
off the mortgage, it's really, really surprising how quickly those
savings can ramp up, knocking years potentially off your mortgage

(08:54):
term and saving you thousands in interests. So just be
aware, be curious, don't be afraid of doing some maths.

Iona Bain (09:00):
'Cause I think what's clear from our conversation is that
it doesn't have to be either/ or so long as
you get the facts and you come up with a
plan. I think one of my favorite mottos when it
comes to this whole area is the art of the doable.
Figure out what is doable. And it's very encouraging, actually,
when you said before, Claer, that something is better than
nothing when it comes to your pension, but it is

(09:22):
more about starting early and staying consistent. When it comes
to how you decide to save for a house though,
do you think that perhaps we need to bear in
mind some of these issues around having a mortgage term
that lasts well into our retirement, potentially creating problems for
ourselves further down the line? If we are in a

(09:42):
position to perhaps not take out quite so large a
mortgage, would that potentially be a good idea? Obviously not
possible for everyone, but maybe for some.

Claer Barrett (09:51):
It's ironic, isn't it, that we're having this huge backlash
now against remote working? Because this for me was the
real big hope for younger people. You could afford to
live further out, buy a cheaper property, maybe in a
slightly nicer, more countrified location. And if you've only got
to go into the office physically once, twice, maybe even

(10:13):
three times a week, you're going to save money on
the commuting costs as well. You can get a part-
time commuter ticket. So, this other way of doing things
were starting to open up. Now, I firmly believe that
we will keep hold of the many benefits of flexible
working, I have to say. And I think the benefit
for workers is so great that people would rather be

(10:38):
able to work remotely than have a 10% pay rise,
according to one poll, which we recently wrote about in
the FT. And you do have a choice of who
you work for, and you do have a choice of
the pension scheme of that employer. So, do find out
about what different companies are offering. Many, it will only

(10:58):
be the bare minimum of also enrollment, but many employers
are much more generous. And that is a real bit
of investigation work to do in your sector, in your
industry, finding out from colleagues, from people, from like LinkedIn,
sites like Glassdoor, who are the real Rolls Royce employers
in your sector, and how could that brighten your financial prospects?

Iona Bain (11:21):
Give us a sense, Claer, of what a generous pension
would look like, and what maybe people could be looking
out for in terms of a good offer.

Claer Barrett (11:30):
Okay, so the bare minimum, also enrollment, is that the employee
pays in 5% of their salary before tax and the employer
pays in 3%, so 8% overall. That's the bare minimum,
so long as you earn more than about 10, 000 pounds
a year, say, roughly speaking. But a more generous employer

(11:51):
might pay 6% into the staff pension instead of 3%.
A really generous one might pay 8%. I think if
we get to that stage where people are much more
empowered to ask questions about their pensions early when they've
got time crucially to do something about it, the outcomes
for everyone, future taxpayers and governments included, will be much,

(12:15):
much better.

Iona Bain (12:15):
That's really interesting, 'cause if you go to a dinner party, once
you get to a certain age, the conversation inevitably turns
to mortgages. Or even if you're just out in the
pub or meeting friends.

Claer Barrett (12:26):
House prices.

Iona Bain (12:26):
House prices, mortgages, house-

Claer Barrett (12:28):
Renting.

Iona Bain (12:28):
Exactly.

Claer Barrett (12:29):
Landlords.

Iona Bain (12:29):
" How can we get on the property ladder?" That
is the question. Maybe we need to start having a
more balanced conversation. Then that way, we can start to
have a slightly more balanced financial future.

Claer Barrett (12:39):
And I think Future Fund would be a better name
for pensions, because I say in my book, you think
pension, you think pensioners. Nobody wants to get old.

Iona Bain (12:49):
So, we've talked about how lots of younger people might
feel like this is a totally unachievable dream. Have you
got any glimmer of hope for a young person who
has one advantage on their side, and that is time?
What can they do with that time in order to
try to achieve both these goals, or at least do

(13:12):
something for themselves that will benefit them in the future?

Claer Barrett (13:15):
Yeah, feel more positive rather than full of despair.

Iona Bain (13:18):
Exactly.

Claer Barrett (13:19):
Okay. So doing something, as I've said, into your pension.
Also, if you're self- employed, that is a bigger feature
of the UK labor market, the so- called gig economy.
And of course, you don't get the auto- enrollment pension
with that. You've got to be more proactive and start
a small pension fund saving for yourself. More and more
young people, especially if they're working freelance, are going to

(13:41):
fall into that category. So again, educate yourself. Something small
is better than nothing at all. But then when it
comes to saving for your first home, the lifetime ISA,
yes, there are caveats to this product, namely the property
price cap of 450, 000 pounds, which has never risen in
the near decade since this product was introduced. But you

(14:04):
can save up to 4, 000 pounds a year and
get a 25% government bonus. Now, you can do that
in two ways. You can do it in cash or you
can do it as a stocks and shares ISA. So
if you're looking at a 5, 10, 15 year period to
save up for a house, and you are somebody who
wants to take a bit of risk with your money,
then it is possible to invest that. But the fact is,

(14:27):
a lot of us are not going to be able
to afford to buy a house.

Iona Bain (14:30):
This has been such an interesting discussion, Claer. I would
love to end on your top three things to remember
in the property versus pension debate.

Claer Barrett (14:39):
Okay. Both are important and valuable assets, so try not
to neglect one completely in favor of the other, but
equally remember that even if you can only save something
small into a pension and you're young, over time, those
amounts, as I found out to my cost, can really

(14:59):
add up, especially if you're benefiting from that free money
that your employer is paying into. And finally, I'd just
reiterate, there are tools online. There are mortgage calculators that
you can look at over payments. There are calculators where
you can look at how much pension payments might grow
to over time. Don't be afraid to go and use

(15:21):
them and have a play. The situation may not be
quite so depressing as you think, but an informed choice
with what you're doing with your money is always going
to be better than a guess.

Iona Bain (15:33):
Hear hear. Couldn't agree more. Thank you so much, Claer.

Claer Barrett (15:36):
Thanks for having me.

Iona Bain (15:38):
Loads to consider there. Next time, we're talking all about
inheritance with Dr. Eliza Filby. This podcast is brought to
you by LNG. You can keep up with the show
on YouTube, TikTok and Instagram at Legal & General. I'd love it
if you could follow the podcast, leave us a review,
and help others get a little bit richer, too. Thanks
for listening. Until next time, see you soon.
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