Pensions professionals both inside and outside government have hit out at the Housing Minister’s plan to change the rules so young people can use their pension pots to fund a home deposit.
James Brokenshire (pictured) MP put forward the proposal yesterday but has received a hostile response.
Alistair McQueen, head of savings and retirement at Aviva, said: “Getting on the housing ladder and saving for retirement are the two biggest long-term financial challenges for millions of young people in the UK.
“The idea of funding a house deposit by opening a pension addresses one challenge by exacerbating another.”
He added: “The financial challenges facing young people today are arguably greater than those facing any young generation in the past 50 years.
“Student debt is mounting; jobs for life are no more; incomes are flatlining; gold-plated final salary pensions are a thing of the past; and home ownership is crashing.
“We must seek to do better than simply robbing Peter to pay Paul.”
Jo Deeks, financial advisor at Abacus Financial Options, was even more blunt regarding her disdain for the proposal.
She said: “I think it’s an absolutely terrible idea to let first-time buyers access their pensions as a deposit for property.
“Pensions are meant for retirement.”
She went on to say that it’s hard enough as it is to persuade people to save diligently for their pension, without the rules being changed.
Brokenshire’s idea is also said to have sparked a row within the government, the BBC has reported.
According to the story the DWP has complained to Number 10 about the proposal, which is seen as risky and not helping the people it intends to help.
Brokenshire yesterday 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.
“We should be changing the necessary regulations to allow this to happen, protecting the integrity of pension investments but allowing lenders to innovate and design new products to bring this opportunity to consumers.”