The Treasury will not go ahead with early access to pension saving due to a lack of evidence of the impact it would have on private saving levels.
However, officials will look at expanding trivial commutation rules so that they can apply to private pension saving. The Government will announce further details on the proposals in the autumn.
Treasury financial secretary Mark Hoban says: “The Government is committed to encouraging saving and wants to give individuals greater flexibility in saving for retirement.
“While early access has some merits, there is insufficient evidence to suggest it would act as an incentive to save more into pensions. We will work with industry to develop workplace saving to to supplement pension savings.
“In addition, we will explore other ways of making pension tax rules simpler and more flexible, for example by making it easier to deal with small pension pots.”
The Treasury says it will continue to explore introducing a link between pensions and Isas through a feeder fund model. This could include implementing a threshold above which liquid savings are automatically rolled over into the pension part of a product.
It also suggests further reforms to pensions should be placed on hold until automatic enrolment is rolled out in October 2012.