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SPECIAL FEATURE: Time to advise on pensions?

Robyn Hall

November 11, 2014

MMR requires lenders to be more prudent in their lending and that is what they are doing. Because of the government (I make no distinction between the political parties), young people are now leaving university with huge student loans and of course lenders will take these and pension contributions into account when making their lending decisions. What does the pensions minister expect?

Lenders are not charities. They must comply with a regulatory framework and reward their shareholders. The pensions minister has written: “Clearly, the MMR process was never intended to have this effect. Indeed, it appears utterly counter-intuitive for a person who demonstrates financial prudence and responsibility by saving for a pension to be penalised in the mortgage market”.

Clearly the government did not make its intention “clear”.

In the final analysis a pension saver has less money available to repay their mortgage. So what if they will have a larger pension in thirty years time? The lenders is required to evaluate the here and now.

In a letter to the AMI chief executive, the pensions minister asks for reassurance that borrowers saving into a pension will not be advised “inappropriately” by brokers.

This puts mortgage brokers in an impossible position.

Mortgage brokers are simply interested in getting the best mortgage for their client. Does the pensions minister really want them to review their client’s life, pensions and investments plans? What would the regulator say if they did?

In fact, given that a homeowner will definitely be several hundreds of thousands of pounds better off than a tenant through their lifetime, it may make sense for clients to delay contributing to a pension until their first home has been purchased.

Unfortunately, first time buyer exclusion may mean that many prospective homeowners will not be able to do this until they are in their late 30s to late 40s. Clients may then further delay contributing to a pension to have a family.

So does the pensions minister expect mortgage brokers to give family planning advice too? Because having children may also delay pension contributions?


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