An article on Yahoo Finance discusses recent proposals from James Brokenshire – “Housing minister James Brokenshire floated recently the controversial idea that young people should be allowed to raid their pension pots to fund a home deposit as first-time buyers. He’s not the first to do so and he probably won’t be the last.”
The article points out several potential issues with this proposal. One significant concern is that young people are already under-saving for retirement due to low incomes and high living costs. The article suggests that allowing them to use their pension funds for home deposits could exacerbate this issue and lead to long-term financial problems. It’s unclear how Brokenshire’s idea would work in practice, whether it would be similar to 100% mortgage products currently available to first-time buyers or literally dipping into the pension pot to remove the required amount of savings and putting it into home equity.
Proposal: Housing minister James Brokenshire suggested that young people should be allowed to raid their pension pots to fund a home deposit as first-time buyers.
Criticism: The idea was met with several reasons why it could be a terrible idea with potentially dreadful consequences for those who were to opt for such a scheme, as well as the wider housing market.
Arguments: The main arguments against the proposal were that young people are under-saving for retirement, they can’t rely on a state pension top-up, their home is not a good investment, and it fuels housing demand not supply.