Lib Dems unveil 'pensions for mortgages' scheme

The Deputy Prime Minister announced proposals for getting more people on the housing ladder as he sought to reassure anxious Liberal Democrat activists that the coalition was working for them.

The deputy Prime Minster said:

"We are going to allow parents and grandparents to act as a guarantee if you like so their youngsters... can take out a deposit and buy a home"

The scheme will be targeted at parents who have built up a pension fund worth around £40,000 and are nearing retirement. Lib Dem officials estimated that around 250,000 households have pension assets of around that value.

Clegg told BBC One's Andrew Marr Show:

"We are going to work out ways in which parents and grandparents who want to help their children and grandchildren buy a property of their own.

In a thinly-veiled swipe at Chancellor George Osborne, he also insisted the junior coalition partner would block "wild" Tory calls for £10 billion more to be slashed from the welfare budget.

The developments came on the windswept second day of the Lib Dems' autumn conference in Brighton. Aides stressed that details of the scheme had yet to be finalised, but it will see the lump sum element of pensions used as collateral for raising home loans.

Hundreds of thousands of people could be eligible for the arrangements, which are expected to be in operation by 2015. They will lose their lump sum if the child defaults on mortgage repayments, but the rest of the retirement fund would be unaffected. However, experts warned that the proposals risked leaving people short when they came to give up work.

Otto Thoresen, director general of the Association of British Insurers, said:

"Pensions are designed to mature into a decent retirement income, not for other purposes. Any scheme which uses pensions as a guarantee must ensure that it does not inadvertently make the saver worse off when they retire."

Commenting on the announcement, the BSA said:

"New ideas to assist first time buyers to get onto the housing ladder are welcome. The use of elements of a pension pot as a guarantee however raises some particularly meaty questions which need careful consideration."