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Treasury to propose early access for pensions


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.”


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. This type of system has been in used in several countries in the Far East.

    However, only for qualifying purposes such as towards payoff of mortgage loans, deposit for home purchases, medical bills, etc.

    A more comprehensive system applies in Singapore for early withdrawals and only a relatively small amount is needed to be left in the pot at retirement!

  2. This to me makes a lot of sense I have seen people under the age of 50/55 with reasonable pension pots made redundant and lose their home. By allowing access to their fund this possibly could have been averted

  3. This could be really good for the industry and general savings culture but they will have to consider the fact that it sounds like it could trigger more pension transfers which am not too sure if this is good or bad.
    Early days I guess and as always the fine detail will be left to the last minute just to keep us in suspense !

  4. Hmmmmm. The KiwiSaver is a flexible (ish) medium to long term savings vehicle with a good take up and a steady ongoing subscription record.

    I am informed it’s relative flexibility gives subscribers peace of mind and it is used “generally” in quite a responsible way.

    Perhaps NZ leads the way and all you need to give advice in NZ is a qualification that is the equivalent of a Hairdresser’s!!!!.

    Now what glove puppet said that???

  5. David Trenner - Intelligent Pensions 1st December 2010 at 10:29 am

    I agree with Adrian, early access is needed to make pensions more popular. Hopefully it will be a bit like EPP loanback: everyone wants it, but few actually take it up.

    It will need to be carefully regulated so that people don’t raid their pension funds for short term cashflow, and to ensure that it is not used by certain firms to line their own pockets.

  6. Scrap the ISA & SIPP and combine them into one product, the PSP (Personal Savings Plan). Key features of the PSP:

    ~No tax relief.
    ~No tax on capital gains and income.
    ~Money can be withdrawn at anytime.
    ~No ceiling to the savings allowance.
    ~Can be invested in: equities, bonds, cash and commercial property.

    We have to break the “house as a pension” mentality. The PSP is the way to do this and get capital funneled into the productive part of the economy. A nation of savers not speculators.

  7. Get Shorty is absolutely right. The government should adopt the KISS principle. There are too many people in HMRC, Parliament and the Treasury making up daft rules and regulations (and changing them every 5 minutes) to control the way in which people save for the future. Even a product as simple as an ISA is made complicated by these morons – the tax relief is worth next-to-nothing for the average investor and yet the government sees fit to employ thousands of people in non-jobs to make up meaningless rules and then to enforce them.

  8. Agree with this as suggested it some time ago and wrote to several MP’s on the matter.

    It could help many people especially in the current climate.

    Will have to see the full details in due course but in principal I agree this should be seen as a positive move.

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