Calls by the Housing Secretary for people to be able to use their pension savings to get onto the housing ladder have sparked a row within government.
James Brokenshire said people who had saved into occupational pensions should be free to spend the proceeds when they wished on their first home.
He said using it on a deposit could be a “genuine route” to home ownership.
But it is understood the Department of Work and Pensions (DWP) has complained to No 10 about the proposal.
A departmental source said it could not support the idea “because the evidence shows it will be risky and does not help the people it intends to help”.
In a wide-ranging speech in London, Mr Brokenshire called for a new approach to revive the dream of home ownership for younger generations as part of what he said was a “new contract for a modern Britain”.
While confirming he would not be standing in the Tory leadership election, he set out what he described as a number of “personal” ideas he hoped the next prime minister would adopt.
Foremost among those, he said people should be able to use part of the capital they build up in their pension pots well before retirement to help buy their first home.
He said “record numbers” were putting money into workplace pensions since the system of auto-enrolment was introduced in 2012.
‘Real choice’
Individuals making uninterrupted contributions could typically hope to save up to £35,000 by their mid-40s, he said, and they should be trusted to use the money as they see fit.
“If a couple could combine their pension wealth, both potentially using a proportion to support a deposit, this would make a huge difference to their lives,” he said.
“It would give people real choice, real opportunity. We could say to millions of people in this country, you do have capital, it’s yours, you do have choices, you do have freedom.”
Highlighting what he said were successful initiatives in Canada and New Zealand, he said current regulations should be relaxed to give people early access to their savings to fund home purchases while still protecting the integrity of pension investments.
“It seems rather obtuse that we would deny people the opportunity to do this given that… it is, after all, their money,” he added.
But the idea has sparked a backlash elsewhere in government.
Officials from the DWP are understood to have warned No 10 that it could not be considered as government policy as it risked leaving people without enough to live off in their old age.
A source in the department said the housing market “does not need people to dip into their pensions to buy more houses”.
The government has said automatic enrolment has been a huge success story, with more than 10 million workers saving for their retirement.
Mr Brokenshire has yet to endorse any candidate in the race to succeed Theresa May but has called for those with little chance of winning to pull out to speed up the process.
