Young people: a home or a pension – take your pick

“Young people should be able to raid their pension pots early to help fund a deposit on their first home, a senior Government minister has argued.

Speaking this morning at think tank Policy Exchange, the secretary of State for housing James Brokenshire suggested that allowing savers to use pension savings as a deposit could help alleviate the financial barriers facing first-time buyers.

He said: ‘We should be looking at allowing an individual to use part of their pension pot as a deposit on a first-time home purchase.’

However, one pensions expert has labelled the idea as ‘bonkers’ and ‘dangerous’. …

… Tom Selby, senior analyst at AJ Bell, said: ‘This idea smacks of dangerous political short-termism.

‘While the housing market clearly has its problems, allowing people to raid their pensions is not a sensible answer.

‘Chronic undersaving for later life is one of the biggest challenges facing society today, so a proposal which encourages people to drain their pension pots risks making this problem even worse.’

Steven Cameron, pensions director at Aegon, added: ‘Saving for a house deposit and making provision for retirement are the two greatest financial challenges facing younger generations.

‘But the same money can’t be used twice and there’s a huge risk that offering early access to pensions to pay house deposits will be a far too tempting ‘bird in the hand’ offer.’ …”