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Barnett Waddingham comments on Government’s under-55 early access consultation

Commenting on the government’s launch of public consultation on giving people under-55 early access to their pension, Danny Wilding, Partner at Barnett Waddingham, said:

"It is certainly true that the lack of early access is one of the key reasons that puts many young people off starting to save for their retirement.  And we all know that the earlier one starts to save the easier it is to build up a reasonable level of pension provision. The early access model already operates with limited success in the US through the “401(k)” pension plans.

“However, we have concerns over most of the early access models being consulted upon, as they would be too complex to administer efficiently.  It is important that no further administrative burden falls on the trustees of occupational pension schemes as a result of new early access rules.  In other words, it should not fall on schemes to have to determine whether members satisfy any new early access hardship test. This rules out permanent withdrawal or earlier access to the 25% tax-free lump sum on practicality grounds and a feeder-fund model which mixes ISAs and pensions into a single product would be too complex for consumers to value and would not therefore achieve the goal of increasing savings rates.

“The only model that we think has legs is therefore a loan model allowing individuals to borrow from their pension fund.  This could perhaps take the form of allowing loans for certain purposes to be secured against pension assets, with part of the pension fund allowed to be liquidated early to repay the lender if certain conditions are met.”

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