In a recent webinar, Pensions Minister Guy Opperman put a suggestion to the audience of finance professionals that the government is exploring ways for people to access their workplace pensions early to access funds to use as a deposit for buying a property.
Many criticised this as it would eat into a person’s retirement pot and perhaps put them back 5 years or 10 years in their retirement savings. We have to agree but to a certain extent, don’t we already have the solution?
We already have the Lifetime ISA (LISA), where people in their 20s, 30s can start a LISA and save up to £4,000pa (up to age 50), for a couple that £8,000pa, then when they are ready to buy a home, they can release the funds for the deposit or leave it to run on into their 40s and 50s as a pensions vehicle.
The whole picture right now looks like a ‘déjà vu’ of the 1980s. 3 million unemployed and the then Chancellor Geoffrey Howe launching Mortgage Interest Relief at Source (MIRAs) in 1983 where people got tax relief on interest payments for the first £30,000 of a mortgage or £60,000 for unmarried couples, which was then reduced in 1988 by Nigel Lawson and totally removed by Gordon Brown in 2000.
Stimulating the property market and property inflation makes all property owners happy and feel more secure as the value of their property rises. The government will also have increased revenue, not just from stamp duty but also inheritance taxes and indeed increased ‘equity’ in the Help to Buy Mortgage Deposit Loan Scheme.
The government is already proposing a ‘Generation Buy’ scheme where it will underwrite high loan to value mortgages, very similar to how insurers offered ‘mortgage indemnity guarantee’ (MIG) insurance to lenders in the 1980s and we believe that the government will offer even more incentives to stimulate the property market.
In the words of Mark Twain: “Buy land, they're not making it anymore.”