Change tax-free pension rule for people in these years, Andy Burnham told

Prime Minister Andy Burnham is being told to put a tax-free pension rule in place in the upcoming Budget to help more people buy property. The government has invited various organisations and charities to make submissions about what they think should be included in the upcoming Budget on October 14, the first under Andy Burnham and new Chancellor John Healey. Various recommendations put forward to the government include abolishing Sunday Trading Laws and increasing the Warm Home Discount.

As part of its Budget submissions, the London Chamber of Commerce has urged Mr Burnham to redraw the rules on workplace pensions to allow first-time buyers to use pensions to buy property because getting on the ladder in London is ‘a wall they cannot climb’. Right now, workers are automatically opted in to putting some of their wages into a workplace pension, and employers must then match the contributions up to a certain percentage. This money is then put into a workplace pension scheme tax-free, as it’s deducted before National Insurance and Income Tax is applied to the remainder of earnings.

This pot is then invested over several decades until you can access it from the age of 55, though this is rising to 57. The Chamber is asking the government to change the rules to allow young workers aged 18 to 28, so born between 1998 and 2008, to be able to dip into the pension pot before retirement and use it to put down a deposit on a property/

It suggests: “Give first-time buyers flexibility to divert tax-free pension contributions towards a deposit: “The deposit, not the monthly payment, is the wall most young Londoners cannot climb, and the current system asks a 23-year-old to lock savings into a pension they cannot touch for four decades while renting indefinitely because they cannot save a deposit.

“The UK’s system for saving for retirement is largely built on the majority of pensioners being mortgage-free homeowners by the time they retire. “Given that a significant proportion of young workers will not be mortgage free or homeowners at all by the time they retire, the existing pension contribution system is built for the housing market as it existed forty years ago, not as it exists today.

“Allowing 18 to 28-year-olds to redirect some or all of their own and their employer’s contributions into a first-home savings scheme lets them build the deposit during the years it matters most, then return to building a pension thereafter, at no additional cost to employers.

“Home ownership is itself a form of retirement security, so this is less a raid on the future than a reordering of when each form of security is built, prioritising the foundational asset first.” Mr Burnham and Mr Healey will make their first Budget speech to Parliament on Wednesday, October 28. Among the items already confirmed to be on the agenda are the Cash ISA cut, the tax exemption for state pensioners and the details of the triple lock changes.