Why house deposits and pensions don’t mix

Should first-time buyers be able to access their pension savings in order to get on the property ladder? Pension industry experts say no, despite pensions minister Guy Opperman this month floating the idea of a product allowing savers to use their pensions to help finance a deposit on a first home.

Opperman points to countries such as New Zealand and the US, where retirement savings can be used in this way in certain circumstances. The idea has superficial appeal: young savers are often frustrated that despite having several thousand pounds in their pension funds, they can’t raise the money for a deposit. 

However, the evidence suggests that if people do raid their pensions in this way, they rarely manage to make up for the shortfall over time. More fundamentally, enabling access to pension funds does nothing to improve housing supply – first-time buyers may simply find that prices just become ever more unaffordable.

Opperman also appears to be unaware of lifetime individual savings accounts (Lisas), the scheme introduced in April 2017. These enable savers to put money by, with an additional bonus from the government, that has to be used either for a house purchase or as pension savings. Lisas therefore combine saving for a property and for old age – but have so far proved relatively unpopular.