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Pension drawdown to fund property purchase plan


24th September 2012 | back to article listings BACK    print this article PRINT

Young people struggling to buy their first home will be able to unlock their parents' retirement funds to help secure a mortgage, under controversial plans unveiled by Nick Clegg.

The Deputy Prime Minister announced proposals for getting more people on the housing ladder as he sought to reassure anxious Liberal Democrat activists that the coalition was working for them.

Hundreds of thousands of people could be eligible for the arrangements, which are expected to be in operation by 2015. They will lose their lump sum if the child defaults on mortgage repayments, but the rest of the retirement fund would be unaffected.

However, experts warned that the proposals risked leaving people short when they came to give up work.

Otto Thoresen, director general of the Association of British Insurers, said: "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."

National Association of Pension Funds chief executive Joanne Segars added: "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."

Copyright Press Association 2012


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