A public consultation into allowing under-55s early access to their pensions has been launched by the Government, aiming to discover whether early access could encourage higher levels of private pension saving.

The Government is keen to receive evidence on the potential benefits and risks of allowing early access to pension savings, how it could be offered, and to what extent a reform would be welcomed by pension schemes, providers, individuals and other interested parties.

Financial secretary to the Treasury, Mark Hoban MP said: “The Government is committed to encourage saving and wants to give individuals the maximum flexibility and responsibility to save for retirement. Early access is an idea we are keen to consider, and so today we ask pension schemes, providers and individuals to offer their evidence on the possible merits of any reform in this area.”

Responding to the consultation, NAPF chief executive Joanne Segars said: “The Treasury is right to seek evidence on allowing early access to pension saving. It needs to approach this issue with great caution before it puts any proposal on the table.

“Britain is already suffering a serious pension saving crisis. Changes must not reduce the amount individuals will have for their retirement, or bring even more complexity into an already complicated pension system.”

Barnett Waddingham partner Danny Wilding said: “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.”

The deadline for responses is 25 February 2011. The Government will make a decision on whether to develop more detailed proposals in this area once it has considered all the evidence and views received. The call for evidence document can be viewed at http://www.hm-treasury.gov.uk/d/call_for_evidence_on_early_access_to_pension_savings.PDF

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