NAPF: Early access renders pensions 'a quick fix'

Allowing access to pension pots before age 55 will worsen the savings crisis and increase bureaucracy, the National Association of Pension Funds (NAPF) says.

The government is keen to consider early access in a bid to encourage more people to save for their pensions, and consulted on the idea earlier this month.

But NAPF figures suggest more than four in ten scheme members would not save any more money despite having premature access to their pot.

"People will be tempted to dip into their pensions as a quick fix and instead end up with a serious, long-term problem years down the line," NAPF CEO Joanne Segars says.

"Auto-enrolment is a much better way of boosting pension saving, and the government should focus on getting that right, rather than adding extra layers to an already-complicated system."

Pension funds are also concerned they will not be able to cope with the additional administration early access would bring.

"Pensions are already mired in red tape and this is another burden they do not need. It will be time-consuming to calculate how early access might affect an individual's retirement income, and it will then be difficult to try to communicate that to them."

NAPF says allowing early access in times of hardship such as redundancy leaves providers and trustees with the added burden of judging individual cases.

It argues withdrawing lump sums early from final salary schemes could make scheme funding difficult, particularly for those schemes already in deficit.

Yvonne Braun, assistant director of retirement savings at the ABI, says: "Close inspection shows [early access] is not a silver bullet that will solve the nation's under-saving.

"Before people can access their savings, they actually need to build them up in the first place to make sure they have a decent income in retirement."