Allowing Pension Savers to Access Funds for Housing Deposits: Lessons from Abroad

Strategic Insights -

Britain's stringent pension access rules are trapping many workers into decades of renting in retirement, with a quarter of employees expected to rent or pay a mortgage in their golden years. A report by Schroders and the Pensions Management Institute has revealed that countries on at least five different continents have allowed pensioners to access their savings early for various purposes, including buying a home. This article explores these innovative schemes, their benefits, and whether the UK should adopt them.

Key Takeaways:

  • Savers in Singapore have been able to withdraw cash from their pension and put it towards buying a home since 1968, resulting in a surge of home ownership from 58pc in 1980 to over 90pc now.
  • Similar opportunities are available in countries like Australia, New Zealand, and the United States, allowing pensioners to use their savings for specific purposes such as buying a home or covering medical expenses.
  • Sir Steve Webb, former pensions minister, has warned that by 2045, a million more pension households could be living in rented accommodation if access to pension savings is not expanded.
  • Some countries, such as South Africa, allow pension savers to use their pension pot as collateral for a home loan, but with risks and tax implications.
  • Paying off mortgage arrears is also an option in some countries, allowing savers to withdraw their own contributions or a percentage of their savings to avoid repossession.
  • Covering medical expenses is another reason for accessing pension savings in countries like the US and Singapore, where members can take a penalty-free hardship withdrawal for medical expenses.
  • The UK Labour Government has shown willingness to borrow ideas from abroad, with auto-enrolment and pension reforms inspired by other countries.
  • The Pension Schemes Bill, set to merge all 86 Local Government Pension Scheme pots, and the introduction of collective defined contribution schemes, are ongoing reforms expected to shape Britain's pension landscape.
  • Experts believe that the affordability of the state pension will come under scrutiny, with potential changes to increase savings and employer contributions.

Statistics:

  • 25% of workers in the UK will be renting or paying a mortgage in retirement, with an annual cost of £10,600.
  • In Singapore, $1.3bn was taken out for medical expenses and long-term care in the first three months of 2025.
  • As a result of allowing pensioners to use savings for home purchases, home ownership has increased in Singapore from 58pc in 1980 to over 90pc now.
  • The upcoming Pension Schemes Bill will merge 86 Local Government Pension Scheme pots into six "megafunds."
  • In South Africa, a cap applies on using pension savings as collateral for a home loan, beginning at 60pc of the first R200,000.

Sources:

  • "Pension freedom: why we need to make it easier for people to use their retirement savings to buy a home" by Rob White, Money Writer.
  • Schroders and the Pensions Management Institute report.
  • Scottish Widows study.
  • Sir Steve Webb's comments in the article.
  • The Pensions Management Institute.
  • The Pension Schemes Bill.
  • The Financial Conduct Authority's statement on exploring the idea of using pension funds to buy a home.