Sunday 18 November 2018

Allow people to raid pension pots to pay for deposit on a home, actuaries recommend

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Charlie Weston

Charlie Weston

People who save into a pension should be allowed to borrow from it to fund a house purchase, a leading actuary has argued.

Allowing people access to their retirement fund would make it easier to get people to take out a pension.

Two out of three workers in the private sector have no occupational pension fund.

Actuary Roma Burke said people are put off pensions because the money is locked away for a very long time, up to 40 years in some cases.

She has told a Society of Actuaries conference that home ownership is something the vast majority of people want to achieve.

Ms Burke said people saving for the end of their working days should be allowed to borrow a portion of the fund to use as a deposit for a home.

If they failed to pay the money back into the fund they would lose their tax-free lump sum that can be taken at retirement.

"The big issue for you and me is that once that money goes into that pension pot, we don't see it again for a very long time. It is a notional pot of money, untouchable and inaccessible," she said.

Pension accounts should be more flexible.

"Unlike the traditional pension savings scheme, you have the option to access a part of it to deal with the major lifetime milestones - big-ticket events such as home purchase, significant illness and of course, retirement, said Ms Burke.

"When you put money into this account, you understand the idea is to save for the long term, but recognise that along the way it can help you with these key milestones."

People would not have to set up separate accounts to save for a house deposit: "This approach could be considered an inter-life approach - a younger me is borrowing from an older me to help me with my key life milestones and my aspirations," she said.

The conference was told the new auto-enrolment pension, planned to be introduced the Government on a phased basis from 2022, would be a burden on lower paid workers.

Ms Burke said the auto-enrolment move for around 900,000 people who have no occupational scheme was to be welcomed.

The scheme proposes personal contributions of 6pc of gross earnings. However, it will be 6pc is out of net pay. Ms Burke said this meant that a single person earning the average full-time wage of just over €46,000 per year, with take-home pay of €668 per week, will see it reduce by €53.

This works out at close to 8pc of net take-home pay would likely be a burden for lower-paid workers.

She also warned about deficits in coming years in the fund that pays the State pension.

Irish Independent

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