Housing Minister unveils controversial plan to let people use their pension for a deposit
Housing Minister James Brokenshire (pictured) has proposed changing the rules on pensions so young people can dip into their pension pots to fund a home deposit.
The suggestion has prompted a mixed response, with some retirement experts warning that people may have little left later in life if they spend their pension on their property.
Brokenshire, who was speaking at thinktank Policy Exchange today, 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.”
Simon Chalk, managing director of Laterliving Planner, who specialises in equity release, admitted that if he was 20 he’d likely prioritise becoming a homeowner.
He compared the proposed policy to the pension freedom changes, which came into force in the 2015/2016 tax year.
He said: “It’s a double-edged sword. Some people could benefit but if you screw up, you’re relying on the state.
“It’s the same as the pension freedom. Many have and will do well, but many have and will blow their money and have little to live off.”
He added: “A lot of youngsters won’t have enough in their pension pot to fund a deposit anyway.”