First-time buyers should be allowed to access pension funds to purchase homes, say brokers

A survey of financial advisers revealed that half of them believe struggling buyers should be able to access any pension funds they have to help them get a foothold in the property market

First-time buyers should get access to their pension funds for property purchases, many financial advisers believe.

A survey of brokers has ­revealed half are in favour of struggling buyers being allowed to access any pension funds they have to help get a foothold in the property market.

The research from the Independent Trustee Company (ITC) found limited access to pension funds could help to address the issue of housing affordability.

Such a proposal is controversial because pensions are considered a long-term investment and not designed to be “raided” to buy a home.

On the other hand, allowing people to use retirement funds to buy a home could ­encourage more people to put money into a pension, experts said.

A survey of 160 brokers found half are in favour of allowing access to pension funds for home-buying.

Glenn Gaughran, head of business development at ITC, said adapting pension policies to meet modern saving needs and work trends was something debated periodically within the pensions industry and in government circles.

“It’s interesting to see a growing discussion among almost half of brokers on the need to adapt pension policies to better align with the modern market,” Mr Gaughran said.

He said the restriction on first-time buyers accessing pensions to buy property reflects valid concerns about potential long-term risks to individual financial security and the broader economy, considerations which have historically guided policy decisions.

“Given the economic challenges faced by those striving to own their own home, it is unsurprising to learn that some industry experts believe it could be time to revisit this conversation,” he said.

Mr Gaughran said allowing limited access to pension funds could offer immediate relief to those trying to get their foot on the property ladder. In Australia, people can save up the deposit for their first home through their pension pot.

Mr Gaughran said in this country, there would be a need to maintain a certain level of liquidity in a pension fund, but limited pension withdrawals for property purchases could serve as a prudent step.

“This access could also incentivise people to start saving for retirement earlier or to start a private pension instead of just relying on their state pension to satisfy their retirement needs,” he said.

Current legislation prohibits using pension funds to pay for a property in which the ­pension holder currently resides.

This rule is designed to protect the value of the pension and ensure individuals have a separate income source in the future, distinct from the value of their home.

Meanwhile, almost half of the 160 advisers surveyed by ITC agreed there should be national initiative to streamline retirement savings for ­employees with multiple pension pots.

It would mandate employers to enquire whether new hires already have a pension fund and, if they do, allocate their employer contributions to that fund.

It is estimated there are more than €400m in unclaimed pension benefits in Ireland.

Source: Charlie Weston, Irish Independent, 13/08/2024