'Sense has prevailed' - Early access pension snub welcomed

The pension industry has welcomed the Treasury’s rejection of early access to pensions and supports reform of trivial commutation.

Trivial commutation rules dictate how and when investors can transfer or withdraw small pension funds.

Mike Morrison, head of pensions, AXA Wealth, said there was little demand from consumers for early access.

"Our research found only a third of consumers wanted to access their pension pot early," he said.

However, Morrison added there is a strong need for the provision of a wide range of savings vehicles to help investors save but still have access to emergency money.

Vince Smith-Hughes, head of business development at Prudential, said: "Sense has prevailed. Our analysis completely supports the Government's understanding that early access would pose a significant risk of undermining savings for retirement nationally - a risk not worth taking at this time."

Chris Jones, product and marketing director, Suffolk Life, said research conducted by the company suggested advisers were originally supportive of early access in January, but that support had since waned.

"The real issue here is engaging people with pensions," Jones said. "Early access was one way to do that, but changes to the state pension and other reforms with also do that."

Gary Shaughnessy, UK managing director at Fidelity International, said the government's pledge to develop and encourage occupational savings such as workplace ISAs is positive.

"The proposed system would make clear a considerable sum could be saved flexibly and people would have the choice of when to lock it into their retirement savings, and gain the benefit of tax relief," Shaughnessy said.

Laith Khalaf, pensions analyst at Hargreaves Lansdown, praised the Treasury's pledge to re-examine trivial commutation.

"The Treasury is looking into trivial commutation and equal treatment of workplace and personal pensions as, at the moment, people with personal pensions of under £1,000 may not be able to move their savings if they have other pensions as well.

"Improving trivial commutation will improve shopping around for annuities as people with pension pots of less than £5,000 are unable to use the open market option (OMO)."

Hargreaves Lansdown has previously called for a system whereby investors with small pension pots worth less than £5,000 are allowed to roll all of the money into one sum to purchase an annuity or take as a lump sum.

Under current rules, if the sum of an individual's pension funds is less than £18,000, it is considered ‘trivial', and if the individual is aged between 60 and 75, the money can be 'commuted' or withdrawn.

There is another trivial rule for ‘stranded' occupational pension pots, which can be withdrawn as lump sums if they are less than £2,000. However, this rule does not extend to personal pensions of under £2,000, creating complications for investors.