Oct. 24, 2012
-- Under new plans announced by Deputy Prime Minister Nick Clegg in September, parents and grandparents will be able to use their retirement funds as collateral when securing a mortgage from 2015.
Steve Webb from Retirement Investment Solutions
believes this could offer a real solution for families wanting to help their children to buy their first home, but that there are some very real risks involved. “In theory this announcement is welcomed. Many people want to be able to help their children or grandchildren to get on to the property ladder, and this could provide a way of helping them to raise the large deposits they now need.
“Allowing people with a pension to use it as a form of guarantee to help their family members to buy a home could help hundreds of thousands of people and is a good idea in principle, but they stand to lose the lump sum element of their pension if the mortgage payments go into arrears or default. While the other parts of their fund would not be affected under the outline plans, a pension is not designed to be used in this way and it has the potential to leave people seriously out of pocket when they stop working.
“The full details haven’t been announced yet, so it will be interesting to see how these plans develop and also to see whether they are accompanied by another set of plans to support people to save more for their retirement – another issue which needs to be addressed.”For more pension planning advice visit http://www.retirementis.co.uk