Nick Clegg said the move will help struggling young people get a foot on the housing ladder at a time when large deposits are needed to get a mortgage.
“We have thousands of young people who are desperate to get their feet on the first rung of the property ladder and the number of young people asking for help from family members has doubled,” said the Deputy Prime Minister. “So the government is going to allow those parents and grandparents to act as a guarantor so their youngsters can take out a deposit and buy a home.”
But the Association of British Insurers said the scheme could backfire, harming the guarantors if they have to sacrifice savings later.
“Pensions are designed to mature into a decent retirement income, not for other purposes,” said Otto Thoreson. “Any scheme which uses pensions as a guarantee must ensure it does not inadvertently make savers worse off when they retire.”
And the National Association of Pension Funds (NAPF) added this fails to address major problems in either the housing or pensions market.
“A pension can only be spent once and this policy could end up leaving retirees out of pocket. The UK already has a serious problem with people saving too little for their old age,” said NAPF chief executive Joanne Segars.