Mercer warns about early access "leakage" for pensions
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Mercer has warned against Government proposals to look into early access to pension savings claiming this “leakage” undermines efforts to encourage people to save for retirement.
The firm conducted research across 11 major national pension systems in its Melbourne Global Pensions Index and found that early access hindered efforts to provide sustainable and adequate pension provision in Canada, Chile, China, Netherlands and the United States.
The coalition states that it will “explore the potential to give people greater flexibility in accessing part of their personal pension fund early”, in its agreement.
But global retirement strategist Bruce Rigby says: “Allowing members’ early access to their accumulated savings can have an appealing short term impact and satisfy a range of needs but there is a sting in the tail.
“In countries where such leakage occurs, these payments are rarely paid back in full. This can lead to a lack of sufficient funds in retirement and a greater call on government funds. The problem arises because most people underestimate how much they will need for their retirement or how long they will live.
“Those capitalising on early access risk being unable to purchase adequate retirement incomes, or running out of money in old age if they do not annuitise.
“Financial responsibility to care for these people then falls back onto the state and taxpayers. Early access often means the fundamental goal of ensuring financial self-sufficiency in old age becomes much more difficult.”
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