THE ANSWERS:
James Lloyd, senior research fellow, Social Market Foundation
NO. Some have argued that British workers would be more inclined to save into a pension if they knew that such savings could be accessed in an emergency – for example redundancy or threat of house repossession – something impossible under current pension rules.
But there is no evidence that current rules are deterring individuals from saving into a pension. Any change to allow early access opens up an administrative can of worms and would impose huge public and private sector costs. Instead politicians should leave the current regime alone, and focus on encouraging the use of flexible savings and Isas, to build up savings for use in an emergency.
UK pension policy is drifting towards granting early access to pension savings. However, there is no evidence that people are failing to save in pensions because they are being put off by the current rules. W
With people living longer, healthier lives, pensions have to provide an income for some 25 years plus and so a large amount has to be built up – pensions cannot just be dipped into.
What the next Government needs to do is encourage people to both save for a rainy day and save for their retirement.
John Jory, deputy chief executive, B&CE
YES. The overall objective in further pension reform has got to be making the product fit for purpose again; to become a genuinely attractive way
for people to save for their long term future. Allowing early access to pension savings in times of personal financial crisis would be a good way
to help this – by removing the fear of the money being locked away until retirement come what may, even if, for example, your house is being
repossessed.
But the access issue extends much further, to what happens when you come to turn your savings into income. The UK’s antiquated rules forcing people to buy an annuity, with all the potential detriment this can cause, discourages a large number of potential pension savers.
And the fact that saving in a pension is the one method that guarantees you will pay tax in retirement is another motivation killer. These may
not be the obvious points in the debate about improving access to money held in pensions, but they are equally important issues and central to the pressing need to redesign the UK’s long term savings product architecture. We need a fresh start if increased long term saving really is going to help address the country’s impending retirement income crisis.
