Opinion is split among the public as to whether people should be able to use pension funds to help them get onto the housing ladder, with scepticism this would create further problems around retirement adequacy.
Research by Nest Insight found that 38 per cent of those surveyed thought it was a “very” or “fairly good idea” while 33 per cent said it was not.
The survey found that there was a widely shared view that there was a “pressing need” to help more people buy their first home, particularly those on low-to-moderate incomes. In many cases the difficulties saving for a deposit is one of the biggest barriers to home ownership.
But when it came to using pensions to fund this, perspectives differed. This Nest research found a sizeable proportion of people thought pension funds, typically accumulated through auto-enrolment, offered an “unparalleled opportunity” for people to fund a deposit, especially for those struggling to save due to high rent prices.
But the research says that: “by and large, the public questioned whether pensions are the answer to this problem. Or whether using them would be ‘robbing Peter to pay Paul’, with a ‘home crisis’ becoming a ‘pensions crisis’.”
The pension provider said that not surprisingly support for ‘pensions for property’ was stronger among those most likely to benefit, in other words those most likely to still be renting in retirement.
Those were more likely to say it was not a good idea if they were homeowners, on higher incomes, or in older households. More than half of homeowners, people with higher incomes and older households opposed the idea, compared to just 20 per cent of younger renters.
Nest Insight says this partially reflects generational differences in journeys towards home ownership. But it adds this split “also reflects the role and relative importance of pension savings at different stages in people’s lives – particularly amongst people whose pension income might be lower in retirement than they anticipated.”
Nest adds that when digging into the responses the finding were often more nuanced that headlines suggest.
Among groups most likely to support the idea, the strength of support people expressed was quite muted. Relatively few people thought it was a very good idea, with most saying it was a fairly good idea.
Around half of non-homeowners said the proposal would be helpful to them. But one in five renters said they don’t ever expect to have enough pension savings to make it work. Renters with higher incomes were much likelier to say the idea would be helpful than those with lower incomes.
In contrast, among groups who said it wasn’t a good idea, the degree of opposition was much stronger. As many as half of respondents said it is not a good idea at all.
Both groups expressed common concerns about the impact of these proposals on pension adequacy.
Overall, 65 per cent of survey participants, including 60 per cent of private renters, said that they were worried the idea would mean having less to live on in later life. Underpinning this, several people expressed concerns over whether the state pension would be available to them in later life at all, and that consequently there was a greater need to make their own preparation. And more than 40 per cent of private renters said they didn’t want to use their pension saving towards a home, or that they wanted to keep their retirement savings separate from everything else.
Nest Insight research lead Anna Brain says: “Broadly speaking, people liked the idea that more is being done to help first-time buyers get on the housing ladder. But there was scepticism and even some cynicism over whether pensions are the right answer.
“This means that the benefits of the idea will need to be clearly articulated against the risks and the alternatives if it’s something that policymakers choose to take forward.”
Brain adds that these initial finds also raise some further fundamental questions as to which group would benefit most from this initiatives; what might be needed to support them, were this policy to be introduced and would people be better off in retirement if they accessed pension savings to buy a home.
Nest Insight will look to present further evidence to address these questions in its final report on this issue, due to be published early next year.
