Pensions guru and former secretary to the economic competitiveness policy group of the Conservative Party, Michael Johnson said that under 35s should be allowed to access their pension pots with restrictions about how the money can be utilized. The treasury has already rejected the idea of granting access to pension pots early in April this year after industry wide consultations.
Mr. Johnson, who also is a research fellow at the Centre for Policy Studies, was speaking at the Friends Life leadership debate on pension reforms said the move will encourage Gen Y to save, and will also be within the ambit of present pension rules, which allows 25 percent lump-sum withdrawal at retirement.
Also ISAs should be more closely aligned with pensions since they enjoy better ‘brand’ reputation among consumers.
It may be pertinent to mention here that Mr. Johnson had advocated simplification of the savings regime in 2010. In February this year, he followed up with a report suggesting National Employment Savings Trust (NEST) schemes be made mandatory for all public sector employees earning more than £10,000.
“With the launch of corporate platforms, employers will be able to offer a greater choice of savings vehicles to employees. This variety and accessibility, combined with a programme of financial education, will in our opinion help in the battle to promote the importance of long-term saving as an essential consideration, rather than as a box to be ticked”, said Martin Palmer, head of corporate pensions at Friends Life.
“In other countries people do get access. If it were for proscribed purposes, such as putting a deposit down for a house, that may be an interesting idea. There could be economic consequences. You could meet a social need but inflate the housing market at the same time”, said Chris Wicks of Bridgewater Financial Services.
“I guess there is a case for it but the question is whether it can be controlled sufficiently. On the one hand you are trying to save for your retirement; on the other, if you allow people to dip into that money then they will have less to live off when they retire. There are opposing and equally valid arguments. It depends what you see as the point of the pension”, added the director of the Cheshire based financial service company.