Reports and Briefing Notes

Would allowing early access to pension savings increase retirement incomes

Some stakeholders have argued that allowing early access to pension saving, for example, for a first-home or in circumstances of financial hardship, could encourage more people to save in a pension. Early access may especially incentivise younger people (ages 20-29), women, and men and women in low income groups; who have traditionally been amongst the groups least likely to be saving enough for their pensions. 

This paper was sponsored by B&CE Benefit Schemes and Legal & General and was an initial, independent assessment of a potential policy of early access to pension saving in the UK. The report examines the policy options for early access to pension saving and considers the potential trade-offs between making pension saving more attractive to encourage greater saving levels, but discouraging excessive access which could leave less money available for retirement.

Chapter one considers the potential advantages and disadvantages of allowing early access to pension funds within the UK.

Chapter two explores the possible implications that allowing a US 401(k) policy model of early access might have on the aggregate size of pension funds and individual levels of pension saving in the UK.

Chapter three explores the possible implications that allowing a New Zealand (KiwiSaver) policy model of early access might have on the aggregate size of pension funds and individual levels of pension saving in the UK.

Chapter four examines the potential impact of a feeder fund model of early access on individual’s pension savings.

Chapter five examines the potential impact of an early access to lump sums model on individual’s pension savings.

Chapter six compares and analyses the policy options examined in the paper and looks at the implications for policy. 

Executive Summary