Revised proposal: A member should be allowed borrow their own contributions to buy a house

Well Boss a speaker at a Society of Actuaries conference yesterday backed your suggestion that punters should be allowed to borrow from their AE pot for house purchase. I myself see the "borrow" approach as opposed to simple drawdown as a complication with no purpose other than possibly to act as a psychological reminder that you "owe" your pension pot some future extra contributions.
 
Hi Duke

I was there and absolutely thrilled that someone else had arrived at the same conclusion through a systematic argument very similar to my own.

The ideas were so close she could accuse me of plagiarism had I not posted my submission here.

She also mentioned that Fiona Reddan had an article on the issue in the Irish Times which I had missed. So maybe there is a bit of momentum for this idea.

House before pension? Government plan should allow early access
Letting people draw down some before retirement to help buying a home makes sense

House deposit

One of the big determinations to be made is whether or not people should be allowed draw down some of their pension funds before they retire. With housing in crisis, there are likely to be calls to allow people to use some of their pension savings to fund a deposit on a home.
 
noproblem said:
What happens someone who avails of this and then going into long term unemployment?
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What happens when someone who has bought their house in the normal manner goes into long term unemployment?

What happens when a renter goes into long term unemployment?

Brendan
 
What happens if they go into long term unemployment, can't pay their mortgage and the property is in massive negative equity.

What happens if they decide to quit the country and need to sell the property?
 
If they can't pay their mortgage due to long term unemployment they lose the house. And the money from the pension.

But if they hadn't touched their pension pot, they still have it no matter what.
 
Brendan Burgess said:
I was there and absolutely thrilled that someone else had arrived at the same conclusion through a systematic argument very similar to my own.

The ideas were so close she could accuse me of plagiarism had I not posted my submission here.
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Where do people pick up ideas, from AAM, from reading articles. How did you come up with the idea in the first place. And it would not surprise me that a money person does indeed read AAM.
 
Bronte said:
If they can't pay their mortgage due to long term unemployment they lose the house. And the money from the pension.
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Hi Bronte

If they can buy their house with an advance from the pension fund, it is very likely that they will have a much bigger deposit and so much more equity in their home.

So if they hit hard times, they are more likely to hold onto their homes.

If tax incentives did not distort it, people should pay down their mortgage in full before saving for the long-term.

So you might well have someone in their 50s who loses their job and does not work again. But if they owned their own home without a mortgage, they would at least have some comfort.

Brendan
 
Bronte said:
Where do people pick up ideas, from AAM, from reading articles. How did you come up with the idea in the first place.
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I have argued on Askaboutmoney for the last 20 years that people should not start a pension until they have bought a house and got their mortgage to a comfortable level.

Eight years ago, on the Expert Group on Mortgage Arrears I argued strongly that people should be allowed to take an advance on their pension to pay down their mortgage to help them keep their home.

So when the government proposed an auto-enrolment scheme to force people to save for a pension, it was clearly wrong, and I opposed it.

Then, on reflection, it was clear that if they were allowed to borrow from their pension scheme, it would solve the problem.
 
It's said that about 40% of workers are in a precarious position as regards permanent employment, so i'd imagine that those same people are on pretty low wages. On top of that 40% there are plenty more on low wages as well. The point i'm making is, for that group of people and there are many, they would find it impossible to have enough in their pension contribution to borrow enough in order to help them buy a house, others on a bit higher wages might also find it impossible to have paid in enough. For those who would avail of borrowing 20k, 30k, 40k, 50k, they would need to have started paying substantial amounts into a pension and what age are they going to be for that amount to be in the pot? Does it not look like this might turn out to be a good deal for high earners only?
 
noproblem said:
It's said that about 40% of workers are in a precarious position as regards permanent employment, so i'd imagine that those same people are on pretty low wages. On top of that 40% there are plenty more on low wages as well. The point i'm making is, for that group of people and there are many, they would find it impossible to have enough in their pension contribution to borrow enough in order to help them buy a house, others on a bit higher wages might also find it impossible to have paid in enough. For those who would avail of borrowing 20k, 30k, 40k, 50k, they would need to have started paying substantial amounts into a pension and what age are they going to be for that amount to be in the pot? Does it not look like this might turn out to be a good deal for high earners only?
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50% of houses sold at present are sold to cash buyers ,If you were to add in the people with big pension pots There would be very little left for the people on low to average wages with little or no pension pot

We would need to start building more social housing for the people who will now be priced out because there wages will never allow them to buy within Central Bank guide lines,

People breaking up after buying a house together having used part of there pension to do so will also finish up need to de taken into account ,

Pension savings is for retirement and more so when you look at the pension time bomb coming down the track, What we are seeing at present in housing is nothing when compared to the pension time bomb just around the corner, Trying to solve the housing problem with the pension problem


People Don't realise /understand there is a shortage of people to do the jobs paying low to average wages to provide the services required in Ireland at present

These people will require housing and we need there services there are plenty of people from all over the World who are prepared to work these jobs we need to be Building/provide housing to match,


You would have well off parents putting money into pensions for there children and getting a tax break to create a bigger housing affordability problem than we have at present,
 
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BB,

I am meeting Roma Burke next week. Shes invited into my FIRE group.
I will talk to her about this idea too. Although I dont think it will ever happen.
 
Brendan Burgess said:
Proposal: A first-time buyer should be allowed to take an advance of the current value of their own contributions but not the employer's contributions or the Revenue top-up
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Would that not create an income tax liability in the year of withdrawal?

The withdrawn amount would form part of the withdrawer's personal income in that year.
 
Hi Sop

A loan would not be regarded as income for tax purposes.

If this proposal goes ahead, the legislation would make that clear.

Brendan
 
Brendan Burgess said:
Hi Bronte

If they can buy their house with an advance from the pension fund, it is very likely that they will have a much bigger deposit and so much more equity in their home.

So if they hit hard times, they are more likely to hold onto their homes.

If tax incentives did not distort it, people should pay down their mortgage in full before saving for the long-term.

So you might well have someone in their 50s who loses their job and does not work again. But if they owned their own home without a mortgage, they would at least have some comfort.

Brendan
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I’d prefer to have a decent income with the pension than the house.
 
An article in the Indo agrees with me.

www.independent.ie

It pays to look Down Under for auto-enrolment lessons

Speculation around the likelihood of Ireland meeting its 2024 launch date for the nationwide auto-enrolment pension scheme continues to gain pace following a budget that did not appear to allow for State contributions to the scheme in 2024.
www.independent.ie www.independent.ie

Another positive idea from Australia, that has not come into effect yet, is the ability to allow first-time home buyers to access a portion of their pension pot to assist them in getting on the property ladder. With the focus on housing affordability in Ireland, this type of creative solution may engage younger people with pension saving, although the Irish Government may need to rethink the relatively late start age of 23 if the first-time buyer is to have successfully saved enough for a deposit.
 
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