New evidence in debate over pension access for home ownership
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Should people be able to use some of their pension savings towards buying a first home? A new report by Nest Insight suggests there are benefits but also a risk of unintended consequences, noting that such a scheme would be unlikely to help those who need it most.
Using quantitative and qualitative data in a year-long project, the report published on Thursday, ‘Using pension savings to support home ownership’, adds to the ongoing debate about whether people should be able to access their pension pots to buy a home.
“The last couple of years have seen a rising number of proposals emerging to allow people access to their pension savings in some way, to support purchasing a home,” said Will Sandbrook, managing director of Nest Insight.
Sandbrook said there has been a lack of robust, UK-specific evidence for whether and how approaches could be applied here.
“That’s why we embarked upon this research. It doesn’t address all angles and never could have. Nor does it come down clearly in favour of or against the idea – that wasn’t our goal. But what emerges is a considerable degree of nuance and a clear set of questions and trade-offs that need addressing before a clearer case for or against could be made. We hope this work will help inform the discussion, and contribute to that discussion being truly evidence-based,” he said.
The issue remains a live one as skyrocketing property prices in Western countries threaten to exclude ever larger parts of the electorate from the dream of home ownership. US President Donald Trump, who has his mid-term elections coming up, recently said he would allow people to use their 401k defined contribution savings to buy a home, even as US homebuyers already have the option to take a loan from their DC scheme. Other countries also offer access to pensions for housing, including New Zealand and Switzerland, while Australia has been discussing the move too.
Nest Insight notes that in the UK, home ownership has declined sharply over the past 20 years, while the share of households renting privately has more than doubled to 24% in 2023-24. It predicts that on the current trend, the share of households renting in retirement could go from 6% today to roughly 16% by 2040 – with implications for incomes and the level of state support needed.
The researchers find that using pensions for housing has positives – it could bring forward the timeline for some in accessing a mortgage, help to reduce inequality in home ownership and slow the trend of private renting to later ages.
However, they caution that the relative immaturity of auto-enrolment means “those who need the most help to save for a deposit won’t typically have built sufficient Defined Contribution (DC) pension savings to make a material difference to their ability to buy”.
Giving people access to pensions for home buying means they might use it even if they would not necessarily need to, the report argues, citing further tradeoffs such as mortgage defaults, pension adequacy and systemic risks if house prices rise because supply fails to meet demand, or if pension funds need to hold large amounts of liquidity.
Using quantitative and qualitative data in a year-long project, the report published on Thursday, ‘Using pension savings to support home ownership’, adds to the ongoing debate about whether people should be able to access their pension pots to buy a home.
“The last couple of years have seen a rising number of proposals emerging to allow people access to their pension savings in some way, to support purchasing a home,” said Will Sandbrook, managing director of Nest Insight.
Sandbrook said there has been a lack of robust, UK-specific evidence for whether and how approaches could be applied here.
“That’s why we embarked upon this research. It doesn’t address all angles and never could have. Nor does it come down clearly in favour of or against the idea – that wasn’t our goal. But what emerges is a considerable degree of nuance and a clear set of questions and trade-offs that need addressing before a clearer case for or against could be made. We hope this work will help inform the discussion, and contribute to that discussion being truly evidence-based,” he said.
The issue remains a live one as skyrocketing property prices in Western countries threaten to exclude ever larger parts of the electorate from the dream of home ownership. US President Donald Trump, who has his mid-term elections coming up, recently said he would allow people to use their 401k defined contribution savings to buy a home, even as US homebuyers already have the option to take a loan from their DC scheme. Other countries also offer access to pensions for housing, including New Zealand and Switzerland, while Australia has been discussing the move too.
Nest Insight notes that in the UK, home ownership has declined sharply over the past 20 years, while the share of households renting privately has more than doubled to 24% in 2023-24. It predicts that on the current trend, the share of households renting in retirement could go from 6% today to roughly 16% by 2040 – with implications for incomes and the level of state support needed.
The researchers find that using pensions for housing has positives – it could bring forward the timeline for some in accessing a mortgage, help to reduce inequality in home ownership and slow the trend of private renting to later ages.
However, they caution that the relative immaturity of auto-enrolment means “those who need the most help to save for a deposit won’t typically have built sufficient Defined Contribution (DC) pension savings to make a material difference to their ability to buy”.
Giving people access to pensions for home buying means they might use it even if they would not necessarily need to, the report argues, citing further tradeoffs such as mortgage defaults, pension adequacy and systemic risks if house prices rise because supply fails to meet demand, or if pension funds need to hold large amounts of liquidity.
Interestingly, not all people surveyed were in favour of such schemes. While people were most likely to say that using pension savings towards home ownership was a fairly good idea (29%) and 10% said it was a very good idea, a fifth did not think it was a very good idea, while 13% said it is not a good idea at all.
People’s concerns included wanting to preserve pension savings for retirement, along with doubts that this type of scheme would address the wider housing crisis, according to the report. There were also fears of undermining the pension system, objections to trading off housing security against retirement income, and worries that using pensions for home ownership could become an expectation rather than a choice in future. Mortgage affordability was a further issue being pointed out.
The Pensions Management Institute has welcomed Nest Insight’s report, saying it provides UK-specific evidence.
“The findings underline a crucial point: while a pension access scheme could improve financial security for a relatively small group of households who may otherwise never be able to buy a home, the implications for the much larger group who might use such a scheme to accelerate home ownership are far more complex,” the PMI said.
It urged policymakers not to let housing and pension reform slip down the agenda, saying: “Today’s system still leaves too many barriers in place – especially the lack of suitable, affordable housing – and any improvements in pension adequacy risk being cancelled out by rising rents. Targeted support for lower‑income couples, single‑earner families and older renters facing life shocks could make a real difference to long‑term security. And boosting home ownership doesn’t just help individuals: it also reduces future demand for government rental support, easing pressure on the public purse over time.”
People’s concerns included wanting to preserve pension savings for retirement, along with doubts that this type of scheme would address the wider housing crisis, according to the report. There were also fears of undermining the pension system, objections to trading off housing security against retirement income, and worries that using pensions for home ownership could become an expectation rather than a choice in future. Mortgage affordability was a further issue being pointed out.
The Pensions Management Institute has welcomed Nest Insight’s report, saying it provides UK-specific evidence.
“The findings underline a crucial point: while a pension access scheme could improve financial security for a relatively small group of households who may otherwise never be able to buy a home, the implications for the much larger group who might use such a scheme to accelerate home ownership are far more complex,” the PMI said.
It urged policymakers not to let housing and pension reform slip down the agenda, saying: “Today’s system still leaves too many barriers in place – especially the lack of suitable, affordable housing – and any improvements in pension adequacy risk being cancelled out by rising rents. Targeted support for lower‑income couples, single‑earner families and older renters facing life shocks could make a real difference to long‑term security. And boosting home ownership doesn’t just help individuals: it also reduces future demand for government rental support, easing pressure on the public purse over time.”
