1. Most people do not have enough saved for retirement
It’s a simple fact, that the vast majority of people have not got enough saved for their retirement, especially those that are in the private sector as they do not have the advantage of a Final salary pension scheme. If the amount invested in a pension fund is reduced to pay for a deposit on a house, this will mean that the income the fund produces will be reduced.
2. Tax free cash (Or Pension Commencement Lump Sum as its now called) – is most people’s best opportunity to acquire a lump sum of money
For a lot of ordinary working people, acquiring a lump sum of money is very challenging and their pension may be only time in their life when they can do this. Everyone likes a nest egg to pass onto the next generation or do the things that you never got round to. If the tax free lump sum is given away, this opportunity to acquire a lump sum may be gone forever.
3. Pensions are designed to provide income in retirement
Pensions were designed and created to provide people with an income in retirement, so that they do not have to work until they die. They were never created as an investment vehicle to allow younger generations to get on the house ladder.
4. Tax free cash entitlement may be removed in the future
For the last 5 years or more there have been continual muttering from HMRC that the Pension Commencement Lump Sum may be restricted in some way. It’s an obvious target for HMRC to raise more revenue. And let’s face it they need more revenue. What would happen to Clegg’s idea if this happened?
5. If you have more than 1 child how much money can each of them actually have?
Most people have more than one child and many have several. A pension fund can only stretch so far and I’m sure as parents we would want to treat our children equally. Unless the pension fund is substantial, pensions for property is just not a viable option.
Some notable figures have described the idea as ‘half baked’. That may be a little strong, but one thing’s certain, not a lot of thought went into the practicality of how such a scheme would work.
Instead of looking at ways of getting people onto the housing ladder, maybe it’s time to radically re-think property ownership. Long term letting is now becoming more popular with younger generations and perhaps we should not see anything wrong with this view.