The Association of Consulting Actuaries has given support for government proposals to allow first-time buyers to use pension funds for a deposit, despite widespread criticism from elsewhere in the pension industry.
These proposals were floated by the housing secretary James Brokenshire last week.
The ACA says it shares concerns that retirement provision must not be compromised, by draining funds too early in life.
However, the ACA says that with sufficient safeguards in place, a more flexible approach to saving is preferable to requiring separate savings for different purposes. The ability for future generations to save in a flexible and joined-up manner is essential to help them meet ever increasing and competing savings needs it adds.
ACA chair Jenny Condron says: “Anyone over the age of 55 can use their pension pot tax-efficiently for any purpose, including paying off mortgages.
“Given that younger generations will both work and retire more flexibly than in the past, we believe those under age 55 should also be given some, limited flexibility in how they use their pension savings. We believe this would encourage greater and more efficient saving.”
The ACA has set up a Younger Members’ Group within its membership of consulting actuaries. It is leading the development of initiatives within the ACA to consider possible pensions and savings reforms for people early in their careers and to carry out research, including with employers, around how additional flexibility might sensibly be approached.
ACA Younger Members’ Group chair, Thomas Dalton adds: “The Government currently incentivises both with tax-efficient pensions and with bonuses on Help to Buy ISAs, but young people have to choose which to contribute to and cannot move funds without penalty.
“The Lifetime ISA was intended to provide a flexible savings vehicle that could be used for both retirement and housing, but the restrictions on it render it largely ineffective.
“It cannot be used to meet auto-enrolment requirements and cannot receive employer contributions, so cannot replace a regular pension. We believe a truly flexible savings product would be of great value to young people and could encourage people to save more and earlier.”
He says in order to protect retirement outcome there should be limits on the amount that can be withdrawn and should be mandatory additional contributions following a withdrawal to ensure it is replaced.
“It has been suggested, quite rightly, that more effective policies to increase the supply are also needed, but it will still be necessary to save up for a house deposit. A flexible savings product that meets the varied needs of young savers would encourage greater and more efficient saving.”
