Let people borrow from their pensions

Graham_Devon

Ridiculous if you ask me.

Wages are not enough, bank loans are not enough....so why not use your pension to buy your first home?!

Business lobby the CBI has called for the government to boost activity in the housing market, saying it could be a "game changer" for economic growth.

CBI director general John Cridland suggested employees should be allowed to borrow from their pensions.

"Without a steady stream of eager first-time buyers the housing market stagnates and our whole economy suffers," he said.

"Another way of helping first-time buyers to access finance to get on the property ladder could be to allow them to access locked savings in their personal pension pots through a loan-back scheme," he said at the CBI North-East Annual Dinner.

"Members of company schemes could borrow money from their own pension pot at a low cost, paying the loan back through their salary at any time during their working life."

<shakes head>

Percy1983

I suppose the economy maybe be suffering short term as people aren't cashing as much HPI to spend, on the flip side having a whole generation have lower mortgage payments for the next 25 years will do wonders for the economy.

abaxas

Percy1983 wrote: »

I suppose the economy maybe be suffering short term as people aren't cashing as much HPI to spend, on the flip side having a whole generation have lower mortgage payments for the next 25 years will do wonders for the economy.

But if houses were 1/2 the cost, it would do double the good!

Really2

Government borrows from your pensions and your kids pay the interest in tax.

Can't see it happening, but I think it would make sense on small frozen accounts.

There are many pensions out there (frozen through company liquidation etc) with money in that could be used now that will be worth next to nothing in the future anyway.

Percy1983

Really2 wrote: »

Government borrows from your pensions and your kids pay the interest in tax.

Can't see it happening, but I think it would make sense on small frozen accounts.

There are many pensions out there (frozen through company liquidation etc) with money in that could be used now that will be worth next to nothing in the future anyway.

Can't you just cash them (paying tax of course) anyway?

chewmylegoff

Percy1983 wrote: »

Can't you just cash them (paying tax of course) anyway?

no, not really.

most schemes have rules whereby if you leave shortly after joining (typically <2 years, I think) then you can claim back your contributions (paying income tax as appropriate) but not the employer's contributions.

you can't just cash out.

this scheme is lunatic, but will never happen so who cares.

Thrugelmir

abaxas wrote: »

But if houses were 1/2 the cost, it would do double the good!

The existing debt levels need to be tackled first.

chewmylegoff

Really2 wrote: »

There are many pensions out there (frozen through company liquidation etc) with money in that could be used now that will be worth next to nothing in the future anyway.

like what? the pension schemes are separate legal entities, with their own assets, so if a company goes into liquidation the scheme continues to exist, and continues to invest its assets in order to meet its future liabilities.

if you have small amounts in schemes that you are no longer paying into, you can transfer the benefit into another scheme, and would only be unable to do so if the pension scheme itself was insolvent.

Really2

chewmylegoff wrote: »

like what? the pension schemes are separate legal entities, with their own assets, so if a company goes into liquidation the scheme continues to exist, and continues to invest its assets in order to meet its future liabilities.

if you have small amounts in schemes that you are no longer paying into, you can transfer the benefit into another scheme, and would only be unable to do so if the pension scheme itself was insolvent.

I never said the pension would not exist? I said there are lots out there frozen and worth not a lot at all, and wont be worth much when it comes to draw on them.
Common consensus is if it was under £10K it may not be worth transfering.
It is fairly common that when company's go bust the pensions get frozen and they are not transfered by staff unless worth while .

IronWolf

Absolutely terrible idea bound to end up in a fiasco. Most people have proven they can't be trusted when it comes to being financially responsible.

chewmylegoff

Really2 wrote: »

I never said the pension would not exist? I said there are lots out there frozen and worth not a lot at all, and wont be worth much when it comes to draw on them.
Common consensus is if it was under £10K it may not be worth transfering.
It is fairly common that when company's go bust the pensions get frozen and they are not transfered by staff unless worth while .

why would they be "frozen"? surely in a defined benefit situation they are whatever they were, and in a money purchase situation they would just be whatever your share of the assets is when you get to retirement age. the fund's assets don't somehow stop being capable of being invested just because the company has disappeared. obviously in a defined benefit scheme there is nothing that can fund any black hole, so it might be that the scheme does not have sufficient assets to pay out its liabilities, but why would any rights be "frozen"?

i'm not sure about common consensus being to not transfer out less than £10,000 of value, but if you had £1,000 sitting in a scheme that was frozen in the way you describe, and you weren't going to retire for some time, it would be likely to be worth transferring it out in almost any circumstances (unless the cost of transferring it out was £1,000), because, as you say, when you reached retirement age it would be worth nothing in real terms.