Warning over early access to pensions

Pension_old_woman_410There is insufficient evidence that letting people access their pensions savings early might increase participation in pensions schemes, the Investment Management Association (IMA) has told the UK Treasury.

In its response to the Treasury’s call for evidence on early access to pension savings, the IMA said it welcomed the paper’s consideration of incentives to save, but warned that rather than increase participation and contribution levels, early access could result in unintended consequences such as greater complexity and worse outcomes for individuals in retirement.

Jonathan Lipkin, head of research at the IMA, said: “Providing an early access facility has some intuitive appeal, but there is insufficient evidence that early access will result either in higher participation or contribution levels.  At the same time, greater administrative complexity and costs will inevitably arise from such a step.”

He said the focus should be on promoting simple and transparent savings vehicles that help individuals meet their short and long-term investment needs.  Further consideration of the relationship between ISAs and pensions would be a positive step and could simplify the UK savings environment.

He added: “The introduction of automatic enrolment in 2012 offers a significant opportunity to repair the brand damage to pensions in recent years. Once the impact of automatic enrolment becomes clear, it will be easier to assess how further reform can best be designed and implemented.”

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