The countries that let savers access their pension early – even for a house deposit

Telegraph

5 days ago

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When George Osborne entered the House of Commons to deliver his 2014 Budget, few predicted the seismic changes coming for pensions.
Just minutes later, the then chancellor would strip back decades of restrictions and finally allow savers to access their retirement savings early.
While he transformed how pensions could be accessed, strict limits remained. To this day, unless someone is in serious ill health or worked in a very limited set of professions, they cannot touch their nest egg until age 55 – rising to 57 in 2028.
Critics say the rules are trapping workers into decades of renting in retirement because despite building up healthy pots, many still cannot afford to buy a home.
A study by Scottish Widows found a quarter of workers will be renting or paying a mortgage into retirement, with an annual cost of £10,600 – enough to almost obliterate a full state pension.
It is against this backdrop that calls are growing for further radical changes, including allowing people to raid their pension for a house deposit – something that the Government, midway through its major pensions review, continues to rule out.
Countries on at least five different continents have allowed people to access their pension early already, according to a report co-authored by investment managers Schroders and the Pensions Management Institute.
Here are some of the reasons why – and whether they should come to Britain.
Buying a home
Savers in Singapore have been able to withdraw cash from their pension and put it towards buying a home since 1968. As a result, home ownership has surged from 58pc in 1980 to more than 90pc now.
There are rules on the type of property and how much a prospective homeowner can take out, but anyone meeting the criteria can take advantage.
Similar opportunities are available in countries like Australia, New Zealand and the United States.
Sir Steve Webb, the former pensions minister, said that by 2045, a million more pension households could be living in rented accommodation.
He said: 'Having to fund rent out of an often meagre pension pot is pretty catastrophic for your standard of living in retirement. If we can use the growing pension pot sooner for the specific reason of helping people to buy a house, then this has to be worth looking at.
'I accept that there are risks here, not least that you end up with an even more inadequate pension pot at the end, but that's not as bad as having to fund rent.
'This isn't a panacea, as many people have too little in their pension pot at a relatively young age to be able to make a meaningful contribution towards a deposit, but it will help some – perhaps especially outside the high house price areas of the country.'
Taking a home loan
In South Africa, pension savers can use their pension pot as collateral for a home loan. This applies across their entire pot, but a cap applies – beginning at 60pc of the first R200,000 (£8,350) and falling as more is borrowed.
However, if they fall behind on the repayments, their pension can be used for the repayments – bringing tax implications alongside a threat to their retirement.
Paying off mortgage arrears
In the event of serious mortgage arrears, some countries allow savers to access their pot early. In New Zealand for example, members can withdraw their own contributions, although not those made by the Government. The amount is capped at 13 weeks of living expenses.
Homeowners in Australia and the US can also withdraw some of their pension to avoid the forced sale or repossession of their property.
Covering medical expenses
Some countries do not offer free universal healthcare, but allow access to pension savings in order to meet the cost.
In the US, members can take a penalty-free hardship withdrawal to cover medical expenses for them or a family member are allowed – although they are also taxable. They can also take out funds for funeral costs, tuition fees and other educational expenses.
In Singapore, $1.3bn dollars (£750m) was taken out for medical expenses and long-term care in the first three months of 2025.
For its part, successive UK governments have already shown they are not averse to borrowing ideas from abroad. The hugely successful auto-enrolment, through which people are signed up to a pension until they opt out, was inspired by the world's first such system in New Zealand.
The Labour Government is also midway through a major two-part pension review and lessons have not only been learnt from other countries, they're already on the verge of being implemented.
The upcoming Pension Schemes Bill will merge all 86 Local Government Pension Scheme pots into six 'megafunds' –similar to the Canadian and Australian systems. A new form of pension saving popular in the Netherlands, known as collective defined contribution schemes, is also on the way.
James Brokenshire, then housing minister, first mooted the idea of using pension funds to buy a home back in 2019. As recently as March this year, it was echoed by Nikhil Rathi, the Financial Conduct Authority's chief.
However, the regulator said it had no official plans to explore the idea and the Government has indicated it will not be included in the next round of major pension reforms, which will be published on Monday.
Major changes are still expected however, including steps to increase the amount people are saving and increase employer contributions to their workers' retirements as ministers look to tackle poverty in later life.
Experts also believe that the affordability of the state pension will come under the microscope.