Standard Life head of pensions policy John Lawson says the Government should guarantee investments in infrastructure projects rather than pursuing reforms which would allow parents to use their pension as a guarantee to help first time buyers.
The Department for Work and Pensions and the Treasury are working through plans to allow parents and grandparents to use up to 25 per of their pension to guarantee first-time buyer mortgage deposits by setting aside part or all of their future tax-free cash lump sum entitlement.
Treasury officials are set to enter talks with mortgage and pension industry representatives to work through details of how the proposal could work, what products could be made available and any rules the Government needs to remove.
Around 250,000 people would be eligible for the guarantee, with a minimum of 12,500 expected to take it up.
Lawson (pictured) says: “This is small beer and I do not understand why it is being pushed by the LibDems. It would cost every provider about £1m to change systems and processes to make this possible.
“In the 1930s Britain built its way out of recession and that is what we need to do here. Pension funds could play their part if the Government is prepared to act as a guarantor.
“If the Treasury would guarantee the income from a project, without it costing the taxpayer a penny, a lot of pension money and insurance company money would go into infrastructure.”
NAPF chief executive Joanne Segars says: “At first glance this idea [of using pension funds as a guarantee] leaves us feeling slightly uneasy. A pension can only be spent once and this policy could end up leaving retirees out of pocket. The UK already has a serious problem with people saving too little for their old age.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “This idea is absolutely bonkers. I think this announcement had more to do with party politics than anything else and it absolutely should not be pursued.”