Aegon is calling on the Government to allow people to divert employee and employer pension contributions to pay down debt for a specific period of time.
In its response to the Government’s call for evidence on early access to pensions, Aegon is pitching a “debt to savings” proposal.
It suggests that people in employment could take a pension payment holiday and request that their contributions from their salary, minus tax relief, and their employer’s contributions are diverted into repaying a consolidated loan for a fixed period of time.
On entering the arrangement, the employee would undertake a contractual obligation to pay a similar amount into a pension or other retirement savings vehicle once the debt is cleared for at least the same duration.
Aegon UK head of regula- tory strategy Steven Cameron says the proposal could reduce the opt-out rates for automatic enrolment.
Cameron says: “The proposal gives people a way of paying off their debts. It gets them into the habit of deferring consumption or doing without a part of their salary and once that debt is repaid, it is much more likely that they will automatically roll over into saving for retirement.”
The Retirement Adviser director Nick Flynn says: “I think that this is too complicated for an ordinary employee who has not got a pension currently.
“Nest is going to be a huge education piece and to take that a step further and try to work this in with debt consolidation could be a step too far.”