Lib Dem conference: Pension funds could back mortgages – Clegg
24th September 2012

Many young people are struggling to get on to the housing ladder

Nick Clegg has said parents should be able to use their pension schemes to help their children buy a first home.

Under the Liberal Democrats’ plans, a future lump sum pension payout would be used to guarantee the mortgage.

The party says the extra security could result in making homes more attainable, as it could mean young people having to save up for a smaller deposit.

Mr Clegg said the plan could help many “desperate” young people, but the Saga group questioned its viability.

The size of deposits has risen in recent years, as banks have become less willing to issue mortgages.

Meanwhile, the number of young people asking for help from families, in the shape of cash sums, has increased.

‘Not happened before’

The Lib Dems say their scheme would help those with pension payouts due, but who lack large savings.

Mr Clegg told BBC One’s Andrew Marr Show: “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. It is a pension-from-property scheme.”

Liberal Democrat sources said around 250,000 people had a pension pot of £40,000, with a lump sum element of around a quarter – £10,000 – which could be used as a guarantee.

They estimated that 5% of those with a suitable lump sum would take advantage of the scheme, meaning 12,500 people could potentially benefit.

The parent’s lump sum would be at risk if the child defaulted on the mortgage repayments, but the rest of the pension would be unaffected.

But Ros Altmann, the director general of Saga – a lobby group which represents the over-50s – said borrowing money against the expectation of a future lump sum was dangerous.

Otto Thoresen, director general of the Association of British Insurers, said: “We would want to look closely at the detail of the ‘pension for property’ scheme announced today by Nick Clegg.

“Pensions are designed to mature into a decent retirement income, not for other purposes.

“Any scheme which uses pensions as a guarantee must ensure that it does not inadvertently make the saver worse off when they retire.”

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