Let work­ers bor­row from pen­sions call

The Irish Times - Business - - BUSINESS NEWS - FIONA REDDAN

Work­ers should be able to bor­row from their pen­sion to fund their first home pur­chase as part of the Govern­ment’s new auto-en­rol­ment scheme, a pen­sions ex­pert has said, adding that the net cost of the scheme to em­ploy­ees may be greater than ex­pected.

Speak­ing at the So­ci­ety of Ac­tu­ar­ies in Ire­land pres­i­dent’s con­fer­ence yes­ter­day, Roma Burke, part­ner at Lane Clark and Pea­cock, said the Govern­ment should al­low savers to ac­cess a part of their pen­sion funds to deal with ma­jor life­time mile­stones, such as home pur­chase.

Auto-en­rol­ment is due to be in­tro­duced in Ire­land from 2022 , but the Govern­ment has shown a re­luc­tance to al­low early draw­down in the scheme.

In Bri­tain, pol­i­cy­mak­ers are set to trial an early ac­cess ap­proach to the Nest auto-en­rol­ment scheme, which would see pen­sion con­tri­bu­tions shared be­tween a pen­sion pot and a liq­uid sav­ings ve­hi­cle.

How­ever, Ms Burke is sug­gest­ing some­thing dif­fer­ent for Ire­land; in­stead of draw­ing down money from your pen­sion fund, you just bor­row from it.

‘No tax im­pli­ca­tions’

“This ap­proach could be con­sid­ered an in­ter-life ap­proach – a younger me is bor­row­ing from an older me to help me with my key life mile­stones and my as­pi­ra­tions,” she said, adding that this ap­proach would have no tax im­pli­ca­tions and peo­ple would be en­cour­aged to top-up their pen­sion again be­cause they them­selves are the lender.

Ms Burke also queried how af­ford­able auto-en­rol­ment will ac­tu­ally be. It has been pro­posed that peo­ple will con­trib­ute 6 per cent of their gross earn­ings, but as Ms Burke pointed out, be­cause of the way the sys­tem is pro­posed, this 6 per cent has to come out of net pay, not gross pay.

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