Proposals to allow first-time home buyers to access pension savings could benefit only a relatively small group, while posing complex risks for many individuals and the UK’s housing and pension systems, according to Nest Insight.

The findings of its year-long housing and pensions project, which examined whether people should be able to use some of their pension savings to help purchase a first home, concluded that any potential benefits must be weighed carefully against significant trade-offs and the risk of unintended consequences.

Drawing on a survey of 4,200 people, modelling of different buyer scenarios, analysis of official wealth data, an online discussion forum, and interviews with experts from across the housing and pensions sectors, the report noted that so-called pension access schemes could help some households overcome deposit barriers and enter home ownership earlier.

However, Nest Insight cautioned that the UK’s relatively immature automatic enrolment system meant many of those most in need of support would not have built up sufficient defined contribution savings to access a pension and make a material difference.

As a result, the greatest gains would likely be concentrated among a limited group of people.

The research also highlighted broader risks, including reduced pension adequacy in retirement, greater exposure to mortgage default, and potential systemic impacts if increased demand pushed up house prices or required pension funds to hold greater liquidity.

The project comes against a backdrop of declining home ownership and rising private renting.

Over the past two decades, the proportion of households renting privately has more than doubled, raising concerns that growing numbers of people could enter retirement without housing security and face financial strain as rents consume a greater share of pension income.

Despite this, Nest Insight found public opinion on the proposal to be mixed.

While some respondents supported using pension savings for home ownership, many expressed concerns about undermining retirement provision, failing to address the wider housing crisis, and the risk that accessing pensions for housing could become an expectation rather than a choice.

“Time and again our work at Nest Insight leads us back to the same conclusion," said Nest Insight managing director, Will Sandbrook.

"To support the financial security of low- and moderate-income households, we need to take a holistic view of household finances and the products and services people use.

"Viewing ‘pensions’, ‘emergency savings’ and ‘debt’ as unrelated product categories or policy areas doesn’t reflect the realities of people’s lives, especially those dealing with scarcity and financial volatility. 

“The last couple of years have seen a rising number of proposals emerging to allow people access to their pension savings in some way, to support purchasing a home.

"We hope this work will help inform the discussion, and contribute to that discussion being truly evidence-based.” 

Responding to the research, the Pensions Management Institute (PMI) said the findings brought much-needed UK-specific evidence to a debate that is often driven by intuition rather than analysis.

The PMI stressed that the research underlined a crucial point: while pension access schemes could improve financial security for a small group who may otherwise never be able to buy a home, the implications for the much larger group who might use such schemes to accelerate home ownership were far more complex.

It highlighted key trade-offs identified in the report, including the risk of reduced pension adequacy, increased pressure on house prices if supply failed to keep pace with demand, and the challenge of designing a scheme that reached those most in need without creating unintended consequences across the housing and pensions systems.

With this in mind, the PMI warned that policymakers could not afford to allow housing and pension reform to slip down the agenda.

The organisation argued that persistent barriers, particularly the lack of suitable and affordable housing, meant that any improvements in pension adequacy risked being cancelled out by rising rents in later life.

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