Pension: Could your pots be used to purchase a house? New idea proposed by DWP
Pension savings are built up throughout a person’s working life and automatic enrolment rules can allow employees to generate large sums for their retirement. Recently, Guy Opperman revealed he was looking into how these assets can be used for other elements of life.
In speaking at a recent online event which was focused on the future of pensions, Mr Opperman detailed he was looking into the idea of using auto-enrolment money to fund emergencies.
Additionally, he also theorised the idea of using some of this pension money to use as a deposit for a home for first time buyers.
It should be stressed that these ideas Mr Opperman noted are not government policy nor form potential policy plans, they are simply ideas at the moment.
However, the prospect of using pensions in this way drew the attention of certain experts within the field, with both criticisms and admirations being shared.
Dean Clifford, the co-founder of Great Marlborough Estates, welcomed the idea: "Providing the right safeguards are in place to ensure the money is indeed spent on their first home, then the idea is a sound one.
“Most people view their home as a nest egg anyway, and if people are struggling to get on the property ladder without incurring punitive tax charges from using their pensions then this should be welcomed.
“Paying into a pension or paying-off a mortgage are in effect very similar things and we should allow people to use their money in a way that best suits their needs.
“Even for ‘Generation Rent’, homeownership remains the aspiration of many and it is right that the government and industry alike work to support that."
However, Mary-Anne Bowring, the group managing director at Ringley, expressed dismay at the plans, noting pension resources could be used more productively elsewhere: “People are correct to look at pensions as a solution to the housing crisis but encouraging young people to pull money from their pension pots to buy a home is deeply irresponsible.
“There is a historic opportunity to harness pension fund cash that was previously being invested into shopping centres and offices into delivering new homes for rent.
“Many pension funds are already investing significantly in so-called ‘build to rent’ homes across the UK.
“This asset class is perfect for investment from pension funds, as they require long-term steady income streams to match their liabilities.
“There’s a considerable undersupply of high-quality rental homes in this country and all indicators point to more people renting and for longer, underlining the need to deliver more rental housing.”
Recently, Boris Johnson also hinted at drastic changes that could be made for the property and mortgage markets which will specifically benefit first time buyers.
The Prime Minister recently vowed to get first time buyers onto the ladder, as he detailed in the following Tory conference speech: “We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95 percent of the value of the home - vastly reducing the size of the deposit.
“We believe that this policy could create two million more owner-occupiers - the biggest expansion of home ownership since the 1980s.
"We will help turn generation rent into generation buy.”
These plans were also both welcomed and criticised by many, with some expressing worry with the prospect of mortgages being held up by taxpayer money.
However, as with the case of Mr Opperman’s comments, there has been no official plan laid out yet for how the Prime Minister’s plans will work in practice.
While it remains to be seen how the government may introduce these pension and mortgage plans some people will be eager to see action being taken, as mortgage deals dry up and pension assets become increasingly difficult to understand or track down.
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