ACA voices support for pensions/housing hybrids
On the go: The Association of Consulting Actuaries has thrown its weight behind flexibilities to allow pension savers to divert pots towards housing purchase, after housing secretary James Brokenshire’s controversial proposal.
In a speech last week, Mr Brokenshire called on the next prime minister to allow young people to “make the choice for themselves” when deciding whether to use their savings for home purchase or to fund retirement. The policy was derided for eroding retirement adequacy and pushing up house prices.
Responding on Monday, the ACA said it shared concerns about excessively diluting savers’ pension contributions, but that the policy could work with “sufficient safeguards” in place.
Jenny Condron, the group’s chair, said: “Anyone over the age of 55 can use their pension pot tax-efficiently for any purpose, including paying off mortgages. Given that younger generations will both work and retire more flexibly than in the past, we believe those under age 55 should also be given some limited flexibility in how they use their pension savings in a tax-efficient way.
We believe this would encourage greater and more efficient saving,” she added.
The ACA has set up a young members' group, which is leading the push for greater flexibility.
Chair Thomas Dalton added: “The Lifetime ISA was intended to provide a flexible savings vehicle that could be used for both retirement and housing, but the restrictions on it render it largely ineffective. It cannot be used to meet auto-enrolment requirements and cannot receive employer contributions, so cannot replace a regular pension.”
One significant problem with the Brokenshire plan, highlighted last week by commentators including Royal London’s Sir Steve Webb and the Pensions and Lifetime Savings Association’s Richard Butcher, is that opening up pension saving will only increase demand.
In an already capacity-constrained market, house prices would simply rise further.
Addressing these concerns, Dalton said: “It has been suggested, quite rightly, that more effective policies to increase the supply are also needed, but it will still be necessary to save up for a house deposit. A flexible savings product that meets the varied needs of young savers would encourage greater and more efficient saving.”
No. This isn't a good idea. As well as the reasons @stevewebb1 identifies it will also (a) stoke house price inflation and (b) create precedent for other reasons to remove money from the underfunded pension system. pic.twitter.com/l8jcAGEXke
— Richard Butcher (@RButcherptl) 3 June 2019