BRIGHTON (Reuters) - Britain will allow parents to use money locked up in pension schemes to help their children obtain mortgages and buy their own home, Deputy Prime Minister Nick Clegg said on Sunday.
The scheme, still at the planning stage, aims to give a lift to a sluggish economy with a 125 million pound ($200 million) boost to the housing and construction market.
It comes after Clegg and Prime Minister David Cameron announced 10 billion pounds of government backing for new housing schemes earlier this month.
Parents would be able to use a quarter of the value of their pension savings - normally untouchable until they retire - as security for a cash deposit for their children’s mortgage.
Home ownership is popular in Britain but the cost of buying a property has risen beyond the reach of many young people after lenders tightened borrowing terms following the financial crisis.
“We have thousands of young people who are desperate to get their feet on the first rung of the property ladder but deposits have doubled and the number of young people asking help from family members to get a mortgage has doubled,” Clegg told BBC television.
“We are going to allow ... parents and grandparents to use their pension pots to act as a guarantee so their children and grandchildren can take out a deposit and buy a home,” he said from his Liberal Democrat party conference in Brighton, southern England.
Party aides said they expected around 12,500 Britons might take advantage of the scheme, pledging an average 10,000 pounds from their pensions for mortgage deposits.
However, finance experts were cautious about the proposal. “Any scheme which uses pensions as a guarantee must ensure that it does not inadvertently make the saver worse off when they retire,” said Otto Thoresen, director general of the Association of British Insurers.
Reporting by Tim Castle; editing by Gunna Dickson