28.02.11

Early Access to Pensions Could Damage Retirement Savings

According to the National Association of Pension Funds (NAPF), letting people dip into their pension before they retire could increase dependency on state benefits and create a bureaucratic nightmare for pension providers

The NAPF warns that allowing early access to workplace pension pots would damage overall retirement savings, undermining the Government’s drive to auto-enrol workers into a pension.

In its response to the Government’s call for thoughts on early access, the NAPF says:

“The extra flexibility of early access would only encourage a minority to save more into a pension, while a seemingly small withdrawal could cause a heavy fall in the final value of a pension.  Such losses would leave even more people dependent on a low and complicated state pension system that is in urgent need of reform.”

Joanne Segars, NAPF Chief Executive, said:

 “The UK is facing a crisis in saving for its retirement, and far too many working people are going to rely on one of the lowest state pensions in Europe. So ideas that make workplace pensions more flexible and attractive must be explored.

“But offering early access to a pension is a distraction, not a solution. People will be tempted to dip into their pensions as a quick fix and instead end up with a serious, long-term problem years down the line.

 “Auto-enrolment is a much better way of boosting pension saving, and the Government should focus on getting that right, rather than adding extra layers to an already complicated system.”

The NAPF also cited its Workplace Pensions survey, which revealed that 44 per cent  of workers said having early access into a pension would make no difference to their contribution levels.

 

 

And it pointed out that in the USA, where early access is allowed, pensions that offer early access only see a 6% increase in uptake among individuals when compared with pensions that do not.

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