Deposit or pension? How home-buying schemes let you do both

The challenge of saving for a home deposit vs a pension

According to our most recent buyer intention survey, 88% of budding buyers are prioritising saving for a deposit over saving for a pension. A closer look at the data revealed that it’s not only younger generations doing this, but also many aspiring buyers who are within a decade or two of retirement age.

As property prices continue to increase – Savills predicts a 24.5% rise over the next five years – budding buyers may feel more urgency to buy a home, hence why so many are neglecting their future financial stability to step onto the property ladder sooner rather than later.

But there is another way. One that allows you to save for a deposit and a pension: Affordable homeownership and buying schemes. Let’s take a look at how Shared Ownership, Rent to Buy and London Living Rent offer solutions.

How affordable housing schemes make it easier

Shared Ownership – smaller deposit, bigger pension contributions

When you buy a Shared Ownership home, you only pay a deposit on the share you’re buying, rather than the property’s full market value. The deposit amount is usually between 5% and 15% of the share value. Therefore, the upfront cost of Shared Ownership can be more affordable than a conventional purchase on the open market.

For example, if you buy a 25% share of a home worth £300,000, your share would be worth £75,000. If a 5% deposit were required, you would put down a deposit of £3,750.

Because the deposit required for Shared Ownership is often less than the deposit for an open market sale, it can give you more financial freedom to save money towards a pension.

Rent to Buy – reduced rent to boost deposit savings

Rent to Buy allows eligible tenants in England (outside of London – the equivalent for buyers in the capital is London Living Rent) to rent a new-build property at a discounted rate for a fixed term of up to five years. Homes are let at up to 80% of local market rents with a fixed rate of inflation, giving renters the chance to save a deposit to buy a home outright or with Shared Ownership.

By making it easier to save for a deposit, Rent to Buy can help you transition to homeownership without putting your pension savings on pause.

London Living Rent – reduced renting in the capital

London Living Rent allows eligible renters in the capital to let a high-quality property at a discounted rate based on a third of local household incomes. Homes are offered on stable tenancies for a minimum of three years up to a maximum of 10 years. By paying subsidised rent, tenants can save a deposit towards buying the home with Shared Ownership during their tenancy.

Similar to Rent to Buy, but exclusively available to those living and working in the capital, London Living Rent can help you transition to homeownership. It lowers your monthly housing costs so you can build a deposit without feeling like you have to compromise on pension contributions.

Why you don’t need to choose one over the other

These government-backed buying and renting schemes are designed to help you overcome one of the biggest barriers to homeownership: the deposit. Through Shared Ownership’s smaller deposits and Rent to Buy and London Living Rent’s below-market rents, which support deposit saving, you can experience more financial freedom to save for later life. It’s not a case of deposit or pension, but deposit and pension.

At Share to Buy, we make your choice easier with a selection of new-build homes across England, available through alternative homeownership schemes such as Shared Ownership. Get your home-buying journey underway using our property portal.