The Liberal Democrat leader Nick Clegg has suggested that plans could be adopted which would see parents and grandparents use part of their pension to help their children get onto the housing ladder.
The plans, revealed at the party’s annual conference in Brighton, would see those people who have built up pension funds worth around £40,000 being able to borrow against the lump sum payment to underwrite the mortgage of their children who may not be in a position to afford to buy their first home.
As pension schemes usually allow members to take about a quarter of the value in a lump sum when they retire, the Lib Dem proposal would mean that a parent with a £40,000 pension pot would be able to guarantee £10,000 as a deposit on their child’s first home.
The Lib Dem plans received a lukewarm response from the pensions industry, claiming that it could actually harm the retirement incomes of some families. Otto Thoresen, Director General of the Association of British Insurers, said that pensions were designed for the purpose of maturing into a decent retirement income and any scheme using them as a guarantee must ensure it does not leave the saver worse off as a result.
