Young people should be allowed to dip into their pension pots to fund the deposit for their first home, the Housing Secretary will say on Monday.

James Brokenshire will propose changing the rules on pensions to “empower” first time buyers trying to get on the property ladder.

Last night a former pensions minister said this would push up house prices and “ruin” retirement for young people, forcing them to work in their “seventies and beyond”.

Mr Brokenshire will call on the next Prime Minister to reform pensions to allow young people to “make the choice for themselves” if they want to spend them on property instead.

He is expected to say in a speech at the Policy Exchange, the think tank: “We should be looking at allowing an individual to use part of their pension pot as a deposit on a first time home purchase.

“We should be changing the necessary regulations to allow this to happen, protecting the integrity of pension investments but allowing lenders to innovate and design new products to bring this opportunity to consumers.”

Sir Steve Webb, the former pensions minister and now director of policy at Royal London, said: “I wouldn't muddy that in with pensions.

“We need people to save short term for a deposit, and we need them to save longterm for a pension. The amounts going into pensions for young people are pretty small already but at least they are starting young - if you empty that then they’ll end up working till they’re 75.

Sir Steve Webb credit: Aliona Adrianova

Sir Steve added: “One of the risks is this would just stoke up house prices. The fundamental problem is supply, not demand.

“It is fine to find giving new ways of giving young people ways of buying a home but if there aren’t enough houses, then you have not helped them get a house and you’ve ruined their retirement.

“If you raid the pot early for something else you’ll just be working into your seventies and beyond.”

The average pension pot for people aged 35 to 44 is £35,000, according to data from the Office for National Statistics.

“If a couple could combine their pension wealth, both potentially using a proportion to support a deposit, this would make a huge difference to millions of lives,” he will say.

“Record numbers of people are putting into their pensions. It seems rather obtuse that we would deny people the opportunity to do this, given that we know those who own their own home by retirement are on average a) wealthier and b) do not have the burden of the largest expense in retirement – accommodation.”

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The Housing Secretary will also use his speech tomorrow to warn leadership candidates against “navel gazing” and having a Grand National-style race which takes weeks.

Last month Mr Brokenshire was accused of being out of touch after a photoshoot in his kitchen showed he had four ovens - which he later insisted were “two double ovens”.

Stephen Pound, the Labour MP had said: “Unless he’s running a pizza business on the side, he must have some very hungry friends.”

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