Early Access To Pensions Delayed

At the moment you can access your pension from the age of 55. That is not to say that most people do, but it is possible. This might be particularly helpful for some people as under the current rules it is possible to take the tax free lump sum (25% of the fund) and leave the balance in the pension to grow until it is required as income.

The Government considered motions to grant access to pension funds before 55 but have decided against this for the time being. The thinking being that now is not the right time and that people need encouraging to save not withdraw money from their pensions.

The Financial Secretary said "“The Government is committed to encouraging saving and wants to give individuals greater flexibility in saving for retirement. While early access has some merits, there is insufficient evidence to suggest it would act as an incentive to save more into pensions. 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.”

I can understand the Government's position, but would offer this as a thought. Imagine that you have reasonable funds tied up in a pension pot, you are 52 years old and for whatever reason have managed to get into a position where your debts are such that your home is about to be repossessed. Surely in such circumstances, it would be helpful to have access to the tax free cash so that such debts could be reduced or cleared rather than becoming another repossession statistic. If you were 55 this would be possible, but not at any point beforehand. This seems to be a little nuts. Yes we need to ensure that people do not pillage their pensions so that they then become reliant upon the State, but on occasion, it would seem that the smarter move is the short-term. Context is everything and of course, robbing Peter to pay Paul is not a solution, but the option to create an escape plan seems to me to be entirely reasonable.