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Treasury rules out early access to pensions

 

The Treasury has ruled out plans to give people early access to their company pension, arguing that it would be unlikely to encourage saving.

 

The proposals, which would have allowed individuals to dip into their company pension during their thirties, were the subject of a four month consultation.

 

Currently only those aged over 55 can access their savings in a company pension scheme.

 

However, the Treasury has said the plans should not be considered because there is ‘limited evidence’ that early access would have a positive effect on overall pension contribution levels or significantly help individuals who are facing financial hardship.

 

Instead, the Treasury supported calls to allow more flexibility over access to pension savings upon retirement and welcomed the planned pension reforms, including automatic enrolment in a new national employment-based scheme from 2012.

 

‘While early access has some merits, there is insufficient evidence to suggest it would act as an incentive to save more into pensions,’ said the Financial Secretary to the Treasury, Mark Hoban.

 

‘We will work with 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.’

 

The decision was welcomed by the National Association of Pension Funds (NAPF), which represents 1,200 schemes.

 

‘Letting people dip into their pensions early would not have increased their retirement income,’ said Darren Philp, NAPF director of policy. ‘Instead it would have risked greater dependency on the state pension, and left pension providers in a bureaucratic tangle.’