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 national pension systems in its Melbourne global pensions index and found early access hindered attempts at sustainable and adequate pension provision in Canada, Chile, China, Netherlands and the US.
The Government says it will explore giving people “greater flexibility in accessing part of their personal pension fund early”. But global retirement strategist Bruce Rigby says that while allowing early access can have an appealing short-term impact, there is a sting in the tail.
He says: “In countries where such leakage occurs, these payments are rarely paid back in full. This can lead to a lack of funds in retirement and a greater call on government provision. The problem arises as most people underestimate how much they will need for their retirement.
“Those capitalising on early access risk being unable to purchase adequate retirement income or running out of money in old age. Financial responsibility to care for these people then falls back on the state and taxpayers.”