Our future pensions: they're on the house

I had a nasty turn outside the estate agent's the other day. You know those queasy moments when you suddenly see a photograph of an old flame in the newspaper? Well, I saw a picture of our old house.

It was looking remarkably good for its age – obviously just had a fresh coat of paint and a window job – but what really caught my eye was the asking price. Four times what we paid for it in 1987.

We bought it for £112,000 – three weeks before the hurricane – and here it was, 18 years later, with an extra loft room, some Peter Jones blinds and a £440,000 price tag hanging round its front door knocker.

What was the effect of this apparition? I went straight home and tore up the application form I had got from the building society, to switch from a Liquid Platinum Nest Egg to a Rainbow Crock of Gold Happysaver, or whatever the thing was.

Up until that point, I had been congratulating myself on my financial astuteness in shifting my £2,000 savings from an account paying 2.70 per cent interest to one paying 2.87. But when I sat down and worked out that this would produce a miserable £3.40 more per year, and that I'd already spent more than that on the Tube fare to the new (more distant) building society, well somehow the bottom fell right out of my market.

Let's face it, you don't have to be a professor of economics to work out that putting your money into a building society earns you next to nothing, while putting your money into a building earns you the next best thing to a fortune. As for shovelling your savings into a pension, as the Government keeps urging us, the returns seem not only on the stingy side, but also governed by some lottery-like rules of chance.

Every year, for example, I get sent what Allied Dunbar calls an " illustration" of what my pension might be, and it's a word they use advisedly, since it provides about as accurate a picture of my retirement as a painting by a six-year-old girl of me with a straw hat on and my feet up.

Forget any hard-and-fast figures, you just get a "projected" rate of return, in the same way as I can pick a "projected" winner of the 3.30 at Kempton Park. There's one size of pension, for example, if interest rates are paying five per cent, and another much larger (and thus, you presume, much less likely) one if interest rates are nine per cent.

Plus, of course, a long list of caveats, hedges and unspoken don't-sue-us-ifs, including:

"These figures are only examples and are not guaranteed amounts".

"These figures are not minimum or maximum amounts."

"Your pension fund could be more or less than this."

Thanks for nothing. I also find that if I die after retirement, my wife only gets half the pension. Alternatively, I could opt for a slightly higher annual payout – in which case she gets nothing when I snuff it. In other words, I'd end up not getting out all the money I'd put in.

So when you ask me what I'm doing about a pension, I – and no doubt millions of others – turn to my house and say "There it is". What does it matter if house prices go up and down a per cent or half a per cent? The whole of British society is based on the premise that house prices continue to go up, or at least if they fall, they fall proportionately, so that you can still bank a sizeable sum if you sell a three-bedroom family house and downsize to a two-bedroom flat.

Trust me, in another 10 or 20 years, there are going to be vast numbers of people now in their forties and fifties who are going to be cashing in their bricks-and-mortar pensions and moving into premises that pose less of a challenge to aching knee joints. That is – assuming their children will let them. It's not hard to envisage a generation of plumply fed twentysomethings refusing to budge from the family nest and having to be evicted by mummy-and-daddy court orders.

In some cases, too, the parents will lose their nerve at the last minute, and decide they can't face leaving their rambling old family home of the past 30 years to move into a nice, sensible, two-bedroom white box on a gated estate.

Which means that circa 2020 there's going to be a sudden demand for " character" flatlets, with deliberately built-in quirks and defects: artificially old-looking walls and funny low doorways through which you have to duck in case you bang your head. In some cases, you'll actually be able to specify certain familiar features from your former home, such as a table which sticks out a bit far and which you always catch yourself on as you walk past.

Plus, for more elderly and aristocratic buyers, there'll be care attendants who are summonable by bell, and who arrive dressed not in green municipal workwear, but in butlers' and maids' uniforms, to give the residents the illusion of still owning a large, stately home.

All of this, of course, will be financed by the sums which we'll have made by selling off our homes, and which will hopefully keep ticking over in the bank – until we stop ticking over.

Of course, the real problem would be if those funds did expire before us – in which case, we'd all have to fall back on our pensions. And if that happens – God help us.

The future is grey

If you're not old in 25 years' time, you're going to be feeling left out. Contemplate this relentless advance of the carpet slippers:

Percentage of population over 65:

1950: 10 per cent

1971: 13 per cent

2003: 16 per cent

2030: 25 per cent (projected)

2050: 32 per cent (projected)

Sources: Department for Work and Pensions, Office for National Statistics