Pensions - Articles - Cautions against accessing pensions to fund home deposits


Following Pensions Minister, Guy Opperman, suggesting he is interested in ideas as to how to use pensions for a home deposit, Aegon and Iso comment.

  Steven Cameron, Pensions Director at Aegon said: For young people today, saving for retirement may not be front of mind, with COVID-19 related financial difficulties, paying off student debt and getting onto the housing ladder creating more immediate priorities. Buying a home and saving for retirement will be the biggest and most expensive financial commitments for many people, so there will always be political attractions in offering younger people a way of combining the two. We already have the Lifetime ISA which offers a Government top-up provided it’s used for either a first home or retirement.

 “But extending this concept to pensions more widely needs to be thought through very carefully. Once the money has been spent on the house, it’s no longer there for retirement, meaning many people would have to start again on their retirement savings journey. And with workplace pensions also benefitting from employer contributions, it’s important this money is used for its intended purpose.

 “The earlier people start saving into a pension the better, as contributions paid in the early years have longest to grow and make the biggest difference to ultimate retirement income. Any decision to grant early access to pensions to fund a house purchase deposit is not for the faint hearted and needs to fully take into consideration the longer-term consequences on retirement funds.
  

 Mike Smedley, Partner at Isio, said: “Robbing Peter to pay Paul might be a tempting vote winner as young people struggle to get on to the property ladder but we would caution against the instant gratification of dipping into pension pots. Pension saving is nowhere near where it needs to be; this kind of ‘it’s ok to dip into the piggy bank’ message risks undermining pension policy and the great success of auto-enrolment in increasing savings and the number of people saving. Moreover, do we really need another incentive for young people to increase their debts and add more fuel to the fire of high property prices? Step away from the pension pot!”
  

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