Product providers and advisers believe that allowing early access to pension funds would encourage more people to save.
Speaking at a Money Marketing pension round table last week, Standard Life head of pensions policy John Lawson called on the Government to create a savings regime where people are auto-enrolled into long-term savings but can divert some of their funds into a short-term savings account if they need access to it before retirement.
He said: “We have lots of pieces of legislation to cover different savings incentives. Here is an opportunity to create one savings regime, all within the same legislation, with a short-term pot and a long-term pot, which offer different incentives. It is really a lifetime savings pot.”
Hargreaves Lansdown head of pensions research Tom McPhail said: “You could have a facility to reverse, say, up to 25 per cent on the long-term money back out into the short-term pot. I think that could really work.”
Cicero Consulting director Iain Anderson believes the Conservatives are likely to put some type of lifetime savings policy in their manifesto.
He flagged up a proposal from influential Tory thinktank Policy Exchange where people would be incentivised to save into four separate “jam jars” – one for retirement, another for children, one for an annual treat such as a holiday and another for a major purchase such as a house deposit.
Anderson said: “The Tory thinking is starting to lay out some of these prescriptions. Former Shadow pensions minister David Willetts proposed this in 2004 and the Policy Exchange is building on that approach again. I am expecting that the lifetime saving account concept will be in the manifesto as something for the first term.”
Legal & General wealth policy director Adrian Boulding also welcomed the approach, claiming that some form of early access was vital for auto-enrolment.
He said: “Auto-enrolment is trying to make it easier for the 20 or 30-somethings to join a pension fund but they are still faced with the problem that the pension is beyond their time horizon. Early access suddenly brings what they are putting into the pot today into focus in terms of the time horizon of when they will actually spend it. It is critical to the success of auto-enrolment.”