Your pension fund may be the landlord raising your rent

A case study prepared for a conference on retirement adequacy follows a hypothetical retired woman whose monthly payment depends on her fund meeting a long-term return target. Part of that target would be met by residential property. One of the streets in that portfolio would be the street her daughter rents on. The paper's only claim is that nothing in this arrangement would be irregular.

The mechanics would be ordinary to the point of dullness. The fund would have bought the buildings because housing offers exactly what a pension scheme needs: an income stream that tends to move with inflation, secured against something that does not disappear in a bad quarter. The daughter's rent increase would not be malice, negligence or a scandal. It would be the inflation link, working as designed, on the correct date.

The paper's point is procedural rather than moral. The letter announcing the rent review and the letter confirming the pension indexation would be produced in the same quarter, from the same asset, by two departments that have no reason to know the other exists. They would share a switchboard. The daughter would press two for tenancy matters and the mother would press four for member services, and neither menu would mention the other.

“The fund would hold no opinion about any individual tenant,” a spokesperson for a hypothetical industry body would explain. “It holds a duty to its members. We accept that in this example the tenant and the member are the same household. The duty, unfortunately, only points in one direction, and it points toward the member.”

What the scenario inverts is the direction of inheritance. The familiar story has parents accumulating property and passing it downward. Here the parents' retirement would be financed by the price of the housing their children cannot buy, and the transfer would eventually arrive anyway — decades late, in the form of a flat the daughter had spent thirty years renting two streets away from.

Politically the case is awkward because there is no villain to remove. Proposals to limit institutional buyers of housing would reduce the return that funds an ageing population's retirement. Proposals to protect that return would raise the rent paid by the working generation funding it in the meantime. The same voter would be on both sides of the consultation, and would answer it honestly twice.

No fund has been shown to work quite like this, and the paper names none. But every component of the arrangement is already in place, and the only genuinely speculative element is the moment somebody in a family finally reads the portfolio disclosure closely enough to recognise a postcode.