Nest Insight has published its findings from a project addressing the question: Should people be able to use some of their pension savings towards buying a first home?
The year-long Housing and Pensions project brought together a range of quantitative and qualitative data, including: a nationally representative YouGov survey of 4,200 people; impact modelling for a range of potential home-buyer scenarios; analysis of the ONS Wealth and Assets Survey to understand potential reach; an online discussion forum where 48 people could exchange views and ideas on the topic, and interviews with 16 experts across the housing and pensions industries. Its final report, ‘Using pension savings to support home ownership’, aims to inform the debate over an idea which is polarising but has seen rising interest – and for which there is a significant evidence gap.
In the UK, home ownership has declined sharply over the past 20 years, driven partly by the growing challenge of saving for a deposit. The share of households renting privately has more than doubled, from 11% in 2003-04 to 24% in 2023-2024. If trends continue, the share of households renting privately in retirement could more than double from 6% today to around 16% by 2040 (those aged 45-64 in 2023/24). This would represent a major shift towards renting in retirement and puts pressure on income for older people – meaning that many could face financial hardship because they don’t have enough pension income to afford their rent.
Meanwhile, more than 80% of employees now contribute to a pension – often the largest asset for those who don’t own their own home. This has prompted discussion in policy and industry circles over whether pension savings could be used to support home ownership. Versions of the idea have been implemented in countries such as New Zealand, Singapore and South Africa, but very little evidence exists on its applicability in the UK.
The picture that emerges on pension access schemes is complex and nuanced, with findings including:
Benefits for some – Pension Access Schemes could potentially lower the barriers to saving for a deposit and bring forward the timeline for some in accessing a mortgage, help to reduce inequality in home ownership across and within generations, slow the trend of private renting to later ages, and for some, support greater financial security through working life and retirement. However, the relative immaturity of the automatic enrolment system means that those who need the most help to save for a deposit won’t typically have built sufficient Defined Contribution (DC) pension savings to make a material difference to their ability to buy. This means that under the current system, the greatest gains will likely be limited to a relatively small group of people.
Complex risks and trade-offs – A much larger group of people may use a pension access scheme to accelerate home ownership, even if they could otherwise buy without using their pension savings. But this group could potentially face more complex risks and trade-offs. Concerns include mortgage defaults, pension adequacy, and systemic risks if house prices rise because supply fails to meet demand or pension funds need to hold large amounts of liquidity.
Caution needed – The findings highlight questions across a range of considerations to understand whether there is a version of a pension access scheme that could help people in the UK – including where it might sit in a broader set of changes to housing and pension policies.
Nest Insight’s research indicates that public support for pension access schemes is mixed, and may be difficult to achieve and maintain. People were most likely to say that using pension savings towards home ownership was a fairly good idea (29%), while 10% said it was a very good idea. In contrast, 20% of people said it’s not a very good idea, while 13% said it’s not a good idea at all.
Those most likely to benefit from accessing pension savings to buy a home were generally most supportive. However, even among those who view the idea positively, concerns remain. These include widespread preference for preserving pension savings for retirement, along with doubts that this type of scheme would address the wider housing crisis, fears of undermining the pension system, objections to trading off housing security against retirement income, and worries that using pensions for home ownership could become an expectation rather than a choice in future. Renters also highlighted that lack of a deposit is only one barrier among many, with mortgage affordability a major obstacle.
Will Sandbrook, Managing Director of Nest Insight, said: “Time and again our work at Nest Insight leads us back to the same conclusion. To support the financial security of low- and moderate-income households, we need to take a holistic view of household finances and the products and services people use. Viewing ‘pensions’, ‘emergency savings’ and ‘debt’ as unrelated product categories or policy areas doesn’t reflect the realities of people’s lives, especially those dealing with scarcity and financial volatility.
“The last couple of years have seen a rising number of proposals emerging to allow people access to their pension savings in some way, to support purchasing a home. But there has been a lack of robust, UK-specific evidence for whether and how approaches could be applied here. That’s why we embarked upon this research. It doesn’t address all angles and never could have. Nor does it come down clearly in favour of or against the idea – that wasn’t our goal. But what emerges is a considerable degree of nuance and a clear set of questions and trade-offs that need addressing before a clearer case for or against could be made.
“We hope this work will help inform the discussion, and contribute to that discussion being truly evidence-based.”
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