At a time when many people are remaining in work long after they had expected to retire, in order to secure a reasonable pension, the coalition government has decided against allowing savers to have premature access to the contents of their pension funds.
Figures from the Department for Work and Pensions suggest that as many as seven million people are failing to save enough money for a comfortable life after retirement.
Some believe that the ability to withdraw funds from a pension scheme would actually prompt people to make more savings.
However, after lengthy discussions, the Treasury has opted against the idea of permitting early access to pension funds. Financial Secretary to the Treasury, Mark Hoban stated that “while early access has some merits, there is insufficient evidence to suggest it would act as an incentive to save more into pensions.”
At the moment, pension scheme funds usually remain locked until the saver reaches the age of fifty-five.
One possibility that had been considered by the Treasury was to allow savers to withdraw up to 25% of their pension, if it was required under exceptional circumstances for expenses such as medical care.
The government’s decision to look into other options has been met with support by the NAPF (the National Association of Pension Funds.) Director of Policy for NAPF, Darren Philp has suggested that “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.”
Philp then added: “The UK is facing a worsening crisis when it comes to saving enough for its retirement. Although early access wasn’t a solution, we’re pleased that the government wants to explore other ideas to make pensions more flexible.”