On the go: The Association of Consulting Actuaries is calling for new flexible savings products designed to fulfil young savers’ housing and pensions aspirations.
This, the actuaries said in response to a Financial Conduct Authority discussion paper, would combat the younger generation’s dilemma over whether to save for a deposit or a pension. The ACA’s proposed product outline would feature tax relief and employer contributions, as well allowing withdrawals for house purchase without any penalty for coming out early.
Under auto-enrolment, the majority of young people save for a pension from an early age and many save above the minimum combined contribution level of 5 per cent of earnings to benefit from matching employer contributions.
But this could severely impact the amount of mortgage money they could borrow, the ACA said, as lenders often determine affordability by assessing net income.
According to a recent FCA research paper, half of all 20 to 29-year-olds have no retirement resources and only half of 30 to 39-year-olds have £30,000 saved.
The Lifetime ISA was announced to fill these dual goals by George Osborne as chancellor, but cannot currently be used for auto-enrolment. The ACA said financial services companies are also hemmed in by legislation from offering more-flexible savings products.
The former housing minister, James Brokenshire, also recently suggested that rules should be changed to allow young people to dip into pension pots to fund a house purchase.
However, many pensions experts have warned that one goal could still crowd out the other.
Steven Cameron, pensions director at Aegon, said: “The same money can’t be used twice and there’s a huge risk that offering early access to pensions to pay house deposits will be a far too tempting ‘bird in the hand’ offer.”
