​Danish pensions lobby rejects pension withdrawals for home purchase

Denmark’s pensions industry has rejected the idea of allowing younger people to withdraw their pension savings to finance home buying, saying people should rather be increasing pension contributions.

Analysts at the Danish central bank, Danmarks Nationalbank, recently produced a report on access to the housing market for younger people with targeted financing relief, in which they also rejected the idea, currenly under discussion, of freeing young people to use their pension savings for house purchases.

According to the report, authored by five analysts: “If pension savings are used to purchase housing, assets are moved from pension schemes to housing.

“This can have consequences for overall savings, as there may be differences in returns and risks associated with pension savings and the housing market,” the analysts wrote.

It is understood the idea was proposed by Henrik Ramlau-Hansen, associate professor in CBS’s department of finance, but he was not immediately able to give IPE details.

Asked to comment on the idea from the pensions industry’s perspective, Lotte Katrine Ravn, head of pension policy at Insurance & Pension Denmark (IPD), said: “Our analysis shows that 500,000 Danes are saving too little for retirement. In our opinion that is a more important issue to address.

“As the National Bank’s analysis shows, it would be a bad idea to use pension savings as a deposit to buy your first home,” she said.

For someone aged between 25 and 30, their pension savings would typically not be large enough to make a difference anyway, especially in the Copenhagen area, she added.

“If you save around 18% of your salary into pension you will be well off, but right now the average Dane pays 12% of their income into a pension through their occupational pension,” she said.

“We would like to see more people contributing a higher proportion of their salary to their pension,” said Ravn.

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