Ipswich Building Society has responded to Guy Opperman’s recent suggestion that auto-enrolment pensions contributions could be accessed by first-time buyers as a deposit for a mortgage.

The society described the idea from the Pensions Minister as an “interesting concept” but said it is “highly unlikely” to help many first-time buyers aged in their twenties and thirties.

Speaking during a recent webinar hosted by Prospect Magazine, Opperman indicated that he was open to considering ways in which people could borrow from their auto-enrolment pension savings to help fund a deposit on a house. He did, however, note that the idea was not government policy and was not being considered by government officials.

Responding to the idea, Ipswich head of mortgage sales, Charlotte Grimshaw, said that with the idea still at the “concept stage”, the society would be interested to learn more about how it could work.

“As with any incentive, would-be borrowers should review their individual circumstances and weigh up what’s best for them, and could consider seeking independent financial advice,” Grimshaw said.

“First-time buyers continue to face a difficult market and would do well to continue to build up a deposit for their first property, whilst remaining practical about what their first home should achieve.

“It may be more realistic to get a step on the ladder by first purchasing a smaller property or one in an alternative, cheaper location rather than automatically aiming for the house of their dreams by dipping into their pension.”

The Ipswich also highlighted that a a 90% LTV mortgage for an ‘average’ house, would set someone back over £32,000.

Based on UK average wages, the society calculated that a person in their twenties who has worked full-time over the past eight years and made the minimum auto-enrolment pension contributions would currently have around £4,000 in their pension pot – an amount far below the number they would need for a 10% deposit, even if there are joint buyers.

“It’s certainly an interesting concept, but it’s one that’s unlikely to help many of today’s twenty and thirty-something first-time buyers,” Grimshaw added.

“If young adults were aware that their pension contributions could be used in such a way, they might be more incentivised to contribute a higher percentage of their earnings above and beyond the current minimum requirement, meaning it could be a scheme that has a more significant impact five to 10 years down the line.”

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