‘Let first-time buyers raid their pensions’

Young people should be allowed to dip into their pension pots to fund deposits for their first homes, the Housing Secretary will say today. James Brokenshire will say the rules can be changed while “protecting the integrity of pension investments”. But Sir Steve Webb, the former pensions minister, said the move would “muddy” long-term and short-term saving and “stoke up” house prices. It could even result in people having to work into their 70s, he warned.

YOUNG people should be able to dip into their pension pots to fund deposits for their first homes, the Housing Secretary will say today.

James Brokenshire will propose changing the rules on pensions to “empower” first-time buyers.

But last night a former pensions minister said the move would push up house prices and “ruin” retirement for young people, forcing them to work in their “70s and beyond”.

Mr Brokenshire will call on the next prime minister to reform pensions so young people can “make the choice for themselves” if they want to spend their money on property instead. “We should be looking at allowing an individual to use part of their pension pot as a deposit on a first-time home purchase,” he is expected to say in a speech at the Policy Exchange thinktank.

The “necessary regulations” could be changed “allowing lenders to innovate and design new products to bring this opportunity to consumers”, he will add. And it could be done while “protecting the integrity of pension investments”.

Sir Steve Webb, the former Liberal Democrat pensions minister who is now director of policy at the Royal London insurance company, said: “We need people to save short term for a deposit, and we need them to save long term for a pension. The amounts going into pensions for young people are pretty small already but at least they are starting young. If you empty that then they’ll end up working till they’re 75.”

Sir Steve added that the move could

‘If there aren’t enough houses, you have not helped them get a house and you’ve ruined their retirement’

“just stoke up” house prices. “The fundamental problem is supply, not demand,” he said.

“It is fine giving young people new ways of buying a home, but if there aren’t enough houses, then you have not helped them get a house and you’ve ruined their retirement . . . I wouldn’t muddy that in with pensions.

“If you raid the pot early for something else you’ll just be working into your 70s and beyond.”

The average pension pot for people aged 35 to 44 is £35,000, according to the Office for National Statistics.

Mr Brokenshire will say: “A couple could combine their pension wealth, both potentially using a proportion to support a deposit.”

Being able to buy a house this way “would make a huge difference to millions of lives”, he will add.

“Record numbers of people are putting into their pensions. It seems rather obtuse that we would deny people the opportunity to do this, given that we know those who own their own home by retirement are on average a) wealthier and b) do not have the burden of the largest expense in retirement – accommodation.”

The Housing Secretary will also use his speech to warn Conservative leadership candidates against “navel gazing” and having a Grand National-style race with a host of fences.

Last month Mr Brokenshire was accused of being out of touch after a photoshoot in his kitchen showed he had four ovens.

He later said they were in fact “two double ovens”.

Stephen Pound, the Labour MP, retorted: “Unless he’s running a pizza business on the side, he must have some very hungry friends.”