Proposal to Allow Pension Funds for Home Deposits
Pension consultant Hymans Robertson has put forward a radical proposal that would allow individuals to use up to half of their pension savings, or borrow against their pension, to purchase a home before retirement. The plan aims to address the growing issue of retirees struggling with housing costs, as those who rent in retirement face significantly higher financial strain compared to homeowners who have paid off their mortgages.
Details of the Proposal
According to Hymans Robertson, allowing savers to access 50% of their pension savings could help them secure a larger deposit or enter the property market sooner. The report suggests that once the mortgage is repaid, some of the housing costs could then be redirected back into pension savings. The consultant also noted that making pension savings a condition of obtaining a home loan could encourage more people to save into their pensions and engage with their retirement planning.
Impact on Retirement Income
The proposal highlights a stark contrast in retirement outcomes. A single person currently needs an annual income of £32,700, and a couple £45,400, for a decent retirement, according to the Pensions UK benchmark. This 'moderate' lifestyle covers essentials plus some discretionary spending on food, entertainment, travel, and a car. Calum Cooper, a partner at Hymans Robertson, warned: "Renters retiring will need the full 8% minimum pension contribution savings to provide an income just to cover the cost of rent." He added: "This shows how fragile the pensions and property systems have become. If we fail to do something during this period of pensions reform, then there’s a risk of a 'lost generation' of impoverished renters in retirement."
Broader Housing Challenges
Hymans Robertson acknowledged that their proposal does not address the separate challenge of affordable housing supply. The report states: "The challenge of supply must also be resolved in parallel, so that house prices are managed sustainably for generations to come." The consultant emphasized that home ownership is one of the strongest foundations for financial security later in life, and that pensions and housing cannot be treated in isolation.
