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

Discussion in 'The Government's Pension Consultations' started by Brendan Burgess, 6 Oct 2018.

  1. Duke of Marmalade

    Duke of Marmalade Frequent Poster

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    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.
     
  2. Brendan Burgess

    Brendan Burgess Founder

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    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.
     
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  3. noproblem

    noproblem Frequent Poster

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    What happens someone who avails of this and then going into long term unemployment?
     
  4. gnf_ireland

    gnf_ireland Frequent Poster

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  5. Brendan Burgess

    Brendan Burgess Founder

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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
     
  6. Bronte

    Bronte Frequent Poster

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    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?
     
  7. Brendan Burgess

    Brendan Burgess Founder

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  8. Bronte

    Bronte Frequent Poster

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    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.
     
  9. Bronte

    Bronte Frequent Poster

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    He stays renting, but the state pays.
     
  10. Bronte

    Bronte Frequent Poster

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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.
     
  11. Brendan Burgess

    Brendan Burgess Founder

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  12. Brendan Burgess

    Brendan Burgess Founder

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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
     
  13. Brendan Burgess

    Brendan Burgess Founder

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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.
     
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  14. noproblem

    noproblem Frequent Poster

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    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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  15. RETIRED2017

    RETIRED2017 Frequent Poster

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    Last edited: 9 Nov 2018 at 10:56 PM
    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,
     
    Last edited: 9 Nov 2018 at 10:56 PM
  16. fistophobia

    fistophobia Frequent Poster

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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.
     
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  17. Sophrosyne

    Sophrosyne Frequent Poster

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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.
     
  18. Brendan Burgess

    Brendan Burgess Founder

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    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
     
  19. Bronte

    Bronte Frequent Poster

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    I’d prefer to have a decent income with the pension than the house.
     
    RETIRED2017 likes this.