On the go: The pensions minister’s appeal for suggested schemes that would let young savers use their retirement savings to help them on to the property ladder has been criticised as ignorant of the laws of supply and demand by pensions commentators.
Guy Opperman broached the controversial topic in a recent webinar, according to the Financial Times.
The minister for pensions and financial inclusion told the audience that thanks to automatic enrolment, “within two, three, four or five years, [savers] are going to be facing the wonderful reality of having over £10,000 or more in pensions, but not necessarily having enough money for a deposit”.
Converting pensions into deposits or allowing early withdrawals is not government policy, the MP for Hexham reportedly insisted, but his “door is open” to helpful suggestions.
Pensions industry commentators, however, have been less than enthused about the prospect.
Speaking as a non-homeowner...
— David Robbins (@David_J_Robbins) October 12, 2020
What I want: lower house prices.
The last thing I want: demand-push policies that prop prices up.
Any proposal to let 1st-time buyers use pensions for deposits should model effect on wealth gap between them & folk who bought at lower prices.
“You can see why pensions early access might appeal to politicians, particularly at the moment — it would cost the Treasury nothing in the short term and would likely be popular among younger voters,” said Tom Selby, senior analyst at AJ Bell.
“However, at its worst this reform risks exacerbating the problem of chronic under saving for retirement in the UK, with no guarantee it will actually help would-be property owners.”
Mr Selby said that if anything, the government might more reasonably consider allowing early access to pensions to help young people pay off high-interest debt, which poses a more material threat to their financial future than renting.
“The idea of a ‘sidecar’ savings vehicle — where perhaps a small amount of money is diverted into a cash product for emergencies — merits consideration, although care would need to be taken in ensuring this is appropriate and is simple for employers and individuals to navigate,” he said.
Meanwhile, David Robbins, senior consultant at Willis Towers Watson, took to Twitter to comment that increasing the demand for property without simply push up house prices further.
"Any proposal to let first-time buyers use pensions for deposits should model the effect on the wealth gap between them and folk who bought at lower prices,” he wrote.
