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Could pension savings be used for a house deposit?

Emma Lunn
Written By:
Emma Lunn

Pensions minister Guy Opperman has raised the idea of young people using money saved in a pension for a house deposit.

Opperman was speaking at a webinar run by Prospect magazine when he said he was looking into ways the UK’s workplace pension system could be extended to allow young workers to dip into their pensions for home deposits.

He pointed out that, thanks to auto-enrolment, many young people will have more than £10,000 in their pension, but not enough money for a deposit on a property.

Auto-enrolment began in 2012 and is a government initiative whereby employers must enrol all qualifying staff into a workplace pension. Before that it was up to workers to decide whether they wanted to join their employer’s pension scheme.

Pension rules currently state that savers cannot access defined contribution pension pots before the age of 55 without incurring steep tax penalties.

Opperman said he was also examining whether some pension savings could be diverted to a rainy day fund for auto-enrolled workers.

However, he admitted that neither idea was a potential government policy at this point in time.

The prospect of letting young people access pension savings to buy a property generally received a negative reaction on social media.

Mick McAteer, co-director at the Financial Inclusion Centre, Tweeted: “Terrible idea. You don’t solve one crisis (housing affordability) by making another one worse (reducing the size of pension pots).”

Nicholas Platt, chartered and certified financial planner at Henwood Court, Tweeted: “Crazy – a pension is to replace your income when you stop work, for tomorrow not today.”

The suggestion that pension savings could be used for house deposits comes as UK house prices experience a post-lockdown boost.

According to the Halifax house price index, the average house price in the UK has risen 7.3% year-on-year to £249,870.