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‘Keep pension and mortgage separate, there are better ways to raise a house purchase deposit’ – Star Letter 07/06/2019

  • 07/06/2019
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‘Keep pension and mortgage separate, there are better ways to raise a house purchase deposit’ – Star Letter 07/06/2019
Each week Mortgage Solutions and its sister title Specialist Lending Solutions select the most thoughtful or thought-provoking comments from our readers in our Star Letter.


This week’s top comment came from Andy Wilson, with his response to the article: Make it easier for lenders to offer higher LTV deals’ instead of targeting pension savings – analysis.

Wilson said that for years the financial services industry and government have been repeatedly warning of the pensions crisis and the need for those of working age to take out their own pensions in an attempt to stave off poverty in retirement.

He added: “The state cannot provide anything but a very basic pension so for those with the means to do so then making their own arrangements is vital.

“So why are we even considering allowing youngsters to transfer some of their future income to support a mortgage in their youth? Everyone realises that money paid in to a plan during the early years of a career will grow the most and make the highest contribution to pension wealth – so this idea seems to delay any meaningful investment in their future.

“The same arguments were responsible for the demise of pension linked mortgages in the 80’s and 90’s, when the magical ‘tax free cash’ could be used in place of an endowment plan to pay off a mortgage debt when the client retired – and suggestions of retiring at age 50 were common. How did that work out then?

“To these youngsters I say: keep your pension and your mortgage separate. There are better ways to raise a house purchase deposit.”


Catch-22 for first-time buyers

Another contribution on the subject came from Lisa Peach-Hill, with her response to the article: Use pensions to fund first-time buyer purchases, says housing secretary Brokenshire.

She said: “There are positives and negatives about this idea.

“It is a catch-22 situation at best for first-time buyers, without owning a home they are unlikely to build significant wealth, and without the ability to build wealth due to high rent payments, no home security and the higher living costs that result from that, how can they fund their pensions to the degree needed to provide an acceptable level of income?

“For those on low to average incomes it is very difficult.

“I accept that pensions are an important aspect of future financial planning, but the first-time buyers have needs now. They need homes now, while they are putting roots down and having families.

“It is shocking to think most of them will be lifelong tenants due to high property price to earnings ratios – and without the help of bank of Mum and Dad many of them will never own their own homes.

“What about those young people without wealthy or financially secure parents to help them out? Why should they be expected to pay into pensions for retirement (which could be 50 years off) when they need that money now to build a deposit?

“I think Brokenshire’s attempt at product innovation should be applauded and at the very least explored – it shouldn’t be used as cannon fodder in Westminster.

“It is ok for these MPs to sit around jeering at these things? I bet they are all homeowners with nice fat pensions and have little idea of the struggles young people or tenants face getting onto the property ladder.

“Hopefully there will be someone who can take the fledgling concept from this stage and develop it into something useful – if these young people can’t afford to buy homes and become lifelong tenants, what happens to the UK property market in 10, 20 or 30 years’ time?”


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