Early access and meddling with the current pension rules are not the way forward for UK pensions, warns UK think tank the Social Market Foundation (SMF).

Politicians should not allow individuals to access pension savings prior to retirement, the SMF said, despite arguments that this would make British workers more inclined to save into a pension if they knew such savings could be accessed in an emergency. However, the SMF report shows no evidence that current rules are deterring individuals from saving in to a pension.

The SMF fears that changes could open a huge can of worms in terms of administration, and would impose public and private sector costs.

The regime, the SMF announced at the report launch today, should be left as it is, and focus should instead be put on encouraging the use of flexible savings and ISAs to build up 'in case of emergency' savings.

"UK pension policy is drifting towards granting early access to pension savings," commented James Lloyd, author of the report. "However, there is no evidence that people are failing to save in pensions because they are being put off by the current rules.

"Financial hardship can cause real suffering at different points in peoples' lives but allowing them to get their hands on their pension savings early will just store up problems for the future."

Barry O'Dwyer, managing director of retail life and pensions at Prudential, which sponsored the report, added: "Allowing early access to pension funds would be hugely problematic - short-term gain leading to long-term pain, with people ending up with a pension fund that does not meet their retirement income needs and the burden on the State increasing as a result. Equally, the evidence does not suggest early access is likely to increase the numbers of people saving into a pension."

Yet Nigel Waterson, shadow minister for work and pensions, told attendees that the Conservative party continues to look at early access in their policy manifesto, despite evidence from various surveys showing that this option would not necessarily increase pensions saving.

"We are looking at the possibility of early access and whether it will have an effect on behaviour. This is another reason why we would scrap annuitisation rules. There is a lot more behaviour research to be done on how individuals are likely to respond to early access."

Waterson said the Conservatives are looking at a number of possible models on which to base reforms, and are particularly interested in the loan and withdrawal model, as seen in the US 401K, New Zealand's permanent loan model, and the potential for a feeder fund, which allows saving for a pension while having savings in hand.

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