Don't raid your pension savings to buy a property

Housing minister James Brokenshire has suggested you should be able to raid your pension savings to fund the purchase of your first home. You shouldn't.


Should you be able to raid your pension savings to fund the purchase of your first home, as housing minister James Brokenshire (pictured) has suggested?

The short answer is no. While pension savings might be an attractive target for homebuyers needing a deposit, raiding the piggy bank simply means exchanging today's problem of funding a property purchase for the problem tomorrow of funding retirement.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

However, if you do want to save simultaneously for a future housing purchase and for retirement, there is already a vehicle for doing so: the Lifetime Isa, aimed at savers between the ages of 18 and 40. Like other forms of the tax-free individual savings account, Lifetime Isas can be used to invest in cash savings, or in stocks and shares. Returns are tax-free and for each £4 you save, the government will add £1. This 25%bonus is payable on all contributions you make until the age of 50, though you'll only get it on savings of up to £4,000 each year.

Until you reach the age of 60 you are only supposed to take money out of your account if you're using the money to purchase a property for the first time. Otherwise, there are penalties to pay on withdrawals made before your 60th birthday.

Advertisement - Article continues below

The scheme has got off to a slow start over the past couple of years, but for anyone balancing the need to save for a deposit with the need to put money by for retirement, Lifetime Isas can work well.



Personal finance

Companies cut back on their pensions bills

Britvic is the latest firm hoping a cheaper inflation index will cut pension costs. David Prosser reports.
28 Aug 2019
Personal finance

The benefits of sitting tight with your savings

Agreeing to lock up your cash can boost the interest rate on your savings significantly. Ruth Jackson-Kirby reports.
20 Aug 2019

Good news for pensions savers from HMRC

HMRC has withdrawn its appeal over breaches of the pensions lifetime allowance.
28 Jun 2019
Personal finance

Don’t miss the pensions deadline

There are just five weeks left in the 2018-2019 tax year, so make sure you’ve made full use of your allowances.
6 Mar 2019

Most Popular

House prices

The biggest risk facing the UK housing market right now

For house prices to stagnate or even fall would be healthy for the property market, says John Stepek. But there is a distinct danger that isn't going …
17 Feb 2020

The euro’s slide against the US dollar looks set to continue

The euro has been in a bear market against the US dollar for two years now. And on a broader scale since 2008. A decline like that is telling us somet…
19 Feb 2020
Share tips

Three overlooked stocks to buy now

Each week, a professional investor tells us where he’d put his money. This week: Joe Bauernfreund, portfolio manager at the AVI Global Trust, highligh…
17 Feb 2020

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020