News

No early access to pensions

The Government has decided against allowing people to dip into their pensions early.

The Government has been consulting on the possibility giving people access to their pensions before they retire.

One aim of the proposal was to encourage younger people to save more by removing the disincentive of locking up funds for long periods of time.

However, following the consultation, Mark Hoban, the financial secretary to the Treasury, said that there was “limited evidence that allowing early access would have a positive effect on overall pension contribution levels or provide significant help to individuals facing financial hardship”.

Instead, the Treasury has decided to do more to make pension savings more flexible, and to encourage personal pension contributions through such reforms as automatic enrolment in the new national employment-based scheme from 2012.

Mr Hoban said: “We will work with the industry to develop workplace saving 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.”

At the moment people can only take money from their personal or company pensions once they reach the age of 55.

The decision won the support of the National Association of Pension Funds (NAPF).

Darren Philp, NAPF director of policy, said: “Letting people dip into their pensions early would not have increased their retirement income.

“Instead it would have risked greater dependency on the state pension, and left pension providers in a bureaucratic tangle.”