The National Association of Pension Funds says it is “uneasy” about Government plans to allow people to use their pension pot as a guarantee to help their children raise a deposit to buy their first home.
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.
Deputy prime minister Nick Clegg unveiled the proposal yesterday ahead of the Liberal Democrat party conference.
NAPF chief executive Joanne Segars (pictured) says: “There are housing market tensions which need addressing, but we wonder if this is a good solution. We need to see more detail on how this might work.
“At first glance this idea 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.
“The Coalition Government has already looked at letting people have early access to their pensions and decided against it. People need to keep their pension for their retirement, especially with rising longevity and the costs of long-term care.”
Association of British Insurers director general Otto Thoreson says: “We would want to look closely at the detail of the ‘pension for property’ scheme announced by Nick Clegg.
“Pensions are designed to mature into a decent retirement income, not for other purposes. Any scheme which uses pensions as a guarantee must ensure that it does not inadvertently make the saver worse off when they retire.”
The Treasury has previously rejected proposals to allow people to access a portion of their pension early due to a lack of evidence that it would have a positive impact on saving levels. Pensions minister Steve Webb was a strong advocate of the policy in opposition.
Aegon regulatory strategy manager Kate Smith says: “This is effectively early access ‘lite’. I can understand why the Government wants to look at this because they want to empower people to get onto the housing ladder but I am not convinced this is the right way to do it.”