Pension experts have pitched alternative ideas to the Treasury in response to its call for evidence on its early access proposals.
Last December, the Treasury outlined four potential models to allow people access to their pension before age 55.
These include a loan model, a permanent withdrawal model, early access to the 25 per cent tax-free lump sum and a feeder fund model linking pensions to liquid savings products such as Isas.
Treasury officials have indicated that these proposals are unlikely to be pursued due to a lack of evidence about the benefits to consumers, Money Marketing understands.
This view has been supported by Standard Life’s response, which argues that current evidence is “incomplete, out of date and does not supp- ort the notion that early access increases the amounts that people save”.
Standard also says each of the four options outlined by the Treasury will increase prices on low-charge schemes such as Nest by around 25 per cent.
It puts forward alternative reforms, including allowing people to auto-enrol into a pension or Isa, cutting tax on inter-generational pension transfers from 55 per cent to 25 per cent and letting someone draw down their entire pension fund over three to four years to pay for care fees without having to meet the minimum income requirement.
Aegon has also submitted a radical “debt to savings” proposal which would allow savers to use employer and employee contribution to pay off debt.
Head of regulatory strategy Steven Cameron says: “For some people, it is perfectly rational to want to pay off debt before they start saving.”
MoretoSipps founder John Moret says: “Access to tax-free cash is going to be of only limited value to younger savers, so while it is an option that should be considered for hardship reasons and to help with buying residential property for first-time buyers, we need a clearer indication of how the Government sees short-term and long-term savings meshing together.”