LibDem leader Nick Clegg has announced the launch of a new ‘pensions for property’ scheme in a bid to give the housing market a boost. The deputy prime minister revealed the scheme at the Lib Dem conference in Brighton and appeared on BBC1’s The Andrew Marr Show on Sunday (23rd September) and made a pledge to help Britain’s young people who are finding it incredibly difficult to get on the property ladder in the current economic climate.
Put simply, middle class parents and grandparents would be able to raid their pension funds to help kids and grandchildren to raise deposits. At present, drawing on pension funds is by and large a huge no-no. People will also reportedly be able to guarantee family members’ mortgages using their pensions.
According to reports on the Telegraph website, Lib Dem officials have estimates that around a quarter of a million households have pension assets of around £40,000. The pension for property scheme is aimed at parents who have amassed a pension fund worth around that figure and are approaching retirement age. Wealthier parents with bigger pension pots will be eligible for the scheme but ministers are apparently of the opinion that they are more likely to have other financial assets which could be drawn upon to help their offspring buy property.
The majority of pension schemes allow people to draw a lump sum upon retirement. Under the scheme, this lump sum would be used to help children buy property instead of spent on luxuries like holidays and cars. Participating parents and grandparents would sign an agreement with the mortgage lender confirming that the lump sum will be used to help pay the costs of buying the child’s property.
A £40,000 pension pot would provide a £10,000 deposit.
Mr Clegg told Andrew Marr: “This is part and parcel of something which I think most people agree with, which is that as we fill in the black hole in the public finances we have also got to make sure that we do not put Humpty Dumpty back together again and make the same mistakes, that we rewire the British economy and make it fairer and give people more opportunities.
We have thousands of young people who are desperate to get their feet on the first rung of the property ladder but deposits have doubled and the number of young people asking help from family members has doubled.
We are going to work out ways in which parents and grandparents who want to help their children and grandchildren buy a property of their own, we are going to allow those parents and grandparents to act as a guarantee if you like so their youngsters can take out a deposit and buy a home.”
Sources: Guardian and Telegraph.