Pensions Minister Steve Webb has contacted various mortgage providers about their stance on lending to those saving towards a pension, as he is “deeply concerned” by the fact that many have stopped paying into various schemes in order to qualify for finance.
Mortgage applications have become much more rigorous in recent years, with applicants’ outgoings being considered by banks in detail before they are allowed to borrow. This can include essentials like rent and utilities, to holidays, meals out and other expenses. According to a This is Money report, some mortgage providers are including people’s pension contributions as well. Webb has contacted the Association of Mortgage Lenders in protest, claiming that “it appears utterly counter-intuitive for a person who demonstrates financial prudence and responsibility for savings for a pension to be penalised”.
Barclays, HSBC and the Coventry Building Society have been highlighted as companies who are actively considering applicants’ pension contributions, whereas RBS/Natwest and Lloyds Banking Group are not. According to This is Money, many ‘middlemen’ are advising those looking to buy a new home to stop paying into a pension until their mortgage has been granted, “to make it look as though they have more disposable income”.
Webb, who described the Government as having “gone to great lengths to make saving for a pension more affordable and attractive” in his letter to various mortgage companies, wants those who are saving for retirement to have the same access to mortgages as those who don’t. The Government rolled out Workplace Pensions – where people would be automatically enroled into a pension savings scheme by their employer – in October 2012, in an effort to encourage people to start saving early and to make it as easy as possible for them to do so. In April 2015, there will be even greater pension freedoms for those who have already saved a pension pot, further suggesting that the Government’s stance is one that actively encourages people to take control of their retirement savings. According to statistics from Ipsos Mori, 200,000 people between the ages of 45 and 65 are already planning to draw their pension early, further reinforcing the importance of preparing for retirement to younger generations.