Two providers have criticised reports that a government minister wants to open the door to first time buyers being allowed to tap their pension early to get on the housing ladder.

According to a Daily Telegraph report housing minister James Brokenshire will today propose allowing early pension access to first-time buyers to help them buy a home.

However the idea has not gone down well with the financial services sector who have called it risky and short-termist.

Tom Selby, senior analyst at AJ Bell, said: “This idea smacks of dangerous political short-termism. While the housing market clearly has its problems – particularly for first-time buyers who might struggle to afford the sizeable deposits now demanded by lenders – allowing people to raid their pensions is not a sensible answer. 

“Chronic undersaving for later life is one of the biggest challenges facing society today, so a proposal which encourages people to drain their pension pots risks making this problem even worse.

“There is no guarantee that such a proposal would actually help people get on the housing ladder at all. Unless the Government dramatically boosts the supply of homes in the UK then this plan risks stoking house price inflation.”

Steven Cameron, pensions director at Aegon, said that while helping younger people get on the housing ladder was a good idea there was “huge risk” risk in the proposal.

He said: “Saving for a house deposit and making provision for retirement are the two greatest financial challenges facing younger generations.

“There is merit in looking at how to make housing and pension policy work together, and the previous Chancellor attempted this with the Lifetime ISA which offers a tax incentivised vehicle to save for either a first house deposit or for retirement.

“But the same money can’t be used twice and there’s a huge risk that offering early access to pensions to pay house deposits will be a far too tempting ‘bird in the hand’ offer.

“Those in a hurry to get on the housing ladder could face long term regrets in retirement as money built up at younger ages in pensions are particularly valuable as they have far longer to benefit from investment growth.”