The Treasury is set to outline proposals to allow people to access up to 25 per cent of their pension fund early, Money Marketing understands.
It is understood that a consultation paper proposing early access is due before the end of the year following a commitment in the coalition Government’s agreement to “explore” the issue.
The Treasury will lead the consultation, which is likely to have significant tax and economic implications, but the idea has been driven by pensions minister Steve Webb. He has said he is”philosophically in favour” of early access and indicated support for a model which allows people to obtain a 25 per cent lump sum in certain situations.
Until now it has been unclear whether the Treasury would push forward with proposals.
The consultation is likely to ask for views on the circumstances under which people should be allowed to access their fund early.
Legal & General pensions strategy director Adrian Boulding, who co-authored an independent review on automatic enrolment, says early access is necessary to boost take-up. He says the 25 percent lump sum model, based on the KiwiSaver system used in New Zealand, would be the simplest to implement.
He says: “We will get higher levels of take-up if we introduce early access and we need higher levels of take-up in auto-enrolment because this programme has got to snowball. If all it does is increase the paltry take-up of pensions in the UK to paltry and a bit, then it will not succeed. It should also boost the funds saved in UK pensions in the long term.”
Confederation of British Industry head of employment and pensions policy Neil Carberry says: “You have to be pretty convinced it is going to have positive effects on take-up.”
Standard Life head of pensions policy John Lawson says the Government should consider carrying out an independent review. He says: “It is not proven that early access increases contributions,so before any policy is brought forward, we need to study it in more depth but if they think there is a strong case, the Government should look at it.”