The proposals would let first-time buyers use their retirement pot to put down a deposit, whether it comes from a state or private pension
Radical new plans are suggesting that Brits should be allowed early access to their state pension if it aids them in getting onto the property ladder.
The scheme would enable first-time buyers to utilise their retirement savings to put down a deposit, whether it’s from a state or private pension.
Despite concerns from pension experts about the long-term effects on retirement incomes, ministers are reportedly considering this idea. The Citizen’s Advance scheme, proposed by Andrew Lewin of Welwyn Hatfield and the Social Market Foundation, would allow individuals who have been employed for at least a decade to withdraw 12 months of state pension payments as a lump sum.
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However, this would mean they’d need to delay their retirement by the same period. Mr Lewis stated: “I think the Citizens Advance could have a transformative impact on people who need extra help to get on the housing ladder, or might want to spend a few months off work to support a new young family.”
Investment company Schroders has also proposed a plan to ministers that would permit workers to withdraw money from their private pensions to purchase a house, reports the Express.
James Barham, Solutions executive chairman, disclosed that they received a positive response to the scheme. Ronan O’Riordan, from Schroders, further suggested that giving people early access to their pension could actually encourage them to plan better for the long term.
He stated: “The word pension to many is something really far away what we’re trying to do is make a system where if you’re able to save, say 8% of your salary and then save a little bit more, you can access that early so you can have your deposit for your first house much quicker.”
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“One of the benefits of that is that it could increase conversations among peers around their extra savings, and getting them engaged early could have a compounding effect.”
Meanwhile, state pensioners are bracing themselves for a double tax raid in the upcoming months. The state pension is due to rise by 4.7% in April thanks to the triple lock, making it worth more than the annual tax-free income allowance from 2027 and obliging most pensioners to pay tax.
Money reporter Imogen Tew clarified that pensioners face higher taxes on the money they withdraw from their retirement savings and on the money left in the bank.