Saving for deposit three times more important than pension
Date online: 22/09/2016
The research highlights the importance of making the first move on to the property ladder for under-35s who are also juggling other savings priorities and underlines how the launch of the Lifetime ISA, which enables under-40s to invest up to £4,000 a year in return for a Government bonus of 25% to use for retirement or buying a house, could be a dilemma for younger savers.
The Nottingham’s research shows that around one in three (34%) of under-35s are either saving for the first home or to move home compared with one in five (18%) of the population as a whole. Retirement saving is the main saving and investing priority for the population as a whole with 24% selecting it ahead of 23% who say having cash for unexpected bills is their main priority. But it only becomes the major priority when people reach the age of 45.
And worryingly the research found signs of people cutting back on pension contributions to increase saving on other priorities. Around 22% of those questioned said they cut pension saving in the past two years to boost other savings.
Around a third of them cut back to boost saving for a house while 11% needed to reduce contributions to make ends meet, the study found.
Ian Gibbons, Senior Mortgage Broking Manager at Nottingham Mortgage Services (part of The Nottingham), said: “The Government is providing a wide range of help for savers trying to raise the money for deposits for houses with Help to Buy ISAs and Lifetime ISAs among the deals on offer. The importance that younger savers place on buying their first home or moving home demonstrates that there is strong demand for help with saving with under-35s saying owning a home is three times more important than saving for a pension.
Savings can clearly only go so far but there is a potential risk in cutting back on pension saving and missing out in later life. Potential homebuyers should explore their options for borrowing as there are mortgages available for those with small deposits and a broker who can search the market will help.”