It has recently been suggested by a Senior Government Minister, James Brokenshire, that young people should be able to raid their pension pots to help buy their first home.
Personally, I am not in favour of this. When I think back to buying my first home and struggling to raise the deposit, I know that an opportunity of using money by accessing my pension would have been far too tempting to resist. I now know that those pensions that I set up in the early years are the ones I value the most. They have had the time to grow and without them my retirement would look less comfortable to say the least.
You could argue the point that these funds belong to the plan holder and therefore they should have the final decision as the wether they are used for their house purchase or, their retirement. As per my blog, Goals, posted on the 27th February, focusing solely on your short term goals can have a detrimental effect on the longer term ones. Like I have said, buying my first home in my 20’s was far more of a concern to me than what my retirement income could look like.
One of the biggest challenges facing society is saving effectively for later life, so draining pension pots is certainly not going to help.
In 2012 Nick Clegg drew up plans that would allow first time buyers to use their parents and even grandparents pension pots to help raise house deposits. Thankfully this did not gain traction and I would imagine the same will apply to this suggestion.
The fact of the matter is that last month the Nationwide reported that the number of first time buyers in the property market was approaching levels last seen just before the financial crisis. Perhaps whilst employment rates are rising and, mortgage interest rates remain low, encouraging effective savings plans for a house deposit would be a more favourable idea.
The Lifetime ISA for instance allows people aged between 18 to 50 (no more contributions allowed after age 50) to save up to £4,000 per year into a fund to be used for either a house deposit or retirement with contributions being topped up by a 25% bonus from the government.
There is also the Help to Buy ISA. The first payment to this ISA can be up to £1,200 and then you can pay up to £200 each month. When you buy your property, your solicitor or conveyancer will apply for an extra 25% from the government.
With existing schemes available for buying your home, please could we leave the pensions alone and allow people the chance of a better retirement.
There are a myriad of plans available that can assist with the purchase of residential property and, further information can be obtained from our team at Richmond House Wealth Management Limited by telephoning 0333 241 3350
This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned about the content hereof and any such action or inaction. Professional advice is necessary for every case.
Kristina Bailey, DipFA CeMAP