Let workers borrow from pensions call
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.