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Early access could boost pension sum
The amount of money we save into pensions could be boosted by nearly a third if people were allowed access to the cash early, a report claimed.
The Pensions Policy Institute (PPI) said allowing limited access to money saved in pension schemes under specific circumstances, such as financial hardship or buying a first home, could increase both the number of people saving into a pension and the amount they saved.
But it warned that unless there were restrictions on borrowing from the fund, or people increased the amount they contributed or repaid what they had taken, the actual value of people's retirement income could fall under the scheme.
Chris Curry, PPI research director, said: "There are many different possible ways of allowing early access to savings within pension funds. The 401(k) system of loans is well established in the US, and evidence suggests that this early access increases both the number of people saving in 401(k) and the amount they save, even though only around 20 per cent of people make use of the early access facility each year."
The research, funded by B&CE Benefit Schemes and Legal & General, estimates that if a similar system was introduced in the UK, it could increase pension saving by 30 per cent by 2050.
But it warned that if people in the UK did not increase their contributions or repay what they had borrowed, pension funds could end up being seven per cent lower.
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Wednesday 23 May 2012
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