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Earlier access to pension savings could pump £65bn into economy

Allowing pension savers access to their 25 per cent tax-free lump sum from age 50 would inject £65bn into the UK economy, according to research from the Society of Pension Consultants.

From April 2010 the age at which you could take your pension and benefits including the tax-free lump sum increased from 50 to 55.

The SPC says allowing early access to the tax-free lump sum from 50, a policy previously backed by pensions minister Steve Webb, would inject £65bn into the economy.

In the longer term, the SPC says the measure would add about £2bn per year to Treasury coffers.

SPC president Kevin LeGrand says: “Whilst the exact figures in terms of impact on the economy will vary depending on the assumptions made about the value of occupational pension schemes and the take-up of  options relating to pensions, what is clear is that early access to pension cash sums for those over 50 would in a very short time contribute tens of billions of pounds to the UK’s coffers, bypassing the banks and injecting funds into an economy facing the threat of a double dip recession.”

The £65bn figure quoted is based on a “conservative” £1trn estimate of the value of UK occupational pension schemes.

LeGrand and his colleagues at SPC are in discussions with officials at the Treasury and the Department for Work and Pensions over the proposals.

The Government has already indicated it will consider giving people “greater flexibility in accessing part of their pension fund early”.

However, consultant Mercer has previously warned giving people this option risked undermining efforts to encourage greater levels of saving.

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