Around £65 billion could be injected into the economy if employees were granted early access to tax free pensions cash sums from the age of 50, according to a study conducted by The Society of Pension Consultants (SPC).
The research also highlighted that a further a £2 billion a year could be generated if the government introduced such a move. SPC said the benefit to the UK economy would be a by-product of measures which would be designed to encourage people actively to save for retirement; instead of retirees being forced to wait until 65 to gain access to their savings.
SPC’s view is that access at 50 would incentivise more people to save at a time when confidence in the system is flagging. Moreover, the financial impact on future retirement income and the funding of defined benefit pensions schemes would be neutral as drawdowns would be delivered earlier than is currently the case but discounted to preserve income in retirement.
Kevin LeGrand, president of SPC, said: “Whilst the exact figures in terms of impact on the economy will vary depending on the assumptions made about the value of occupational pension schemes and the take-up of options relating to pensions, what is clear is that early access to pension cash sums for those over 50 would in a very short time contribute tens of billions of pounds to the UK’s coffers, bypassing the banks and injecting funds into an economy facing the threat of a double-dip recession.
“Introducing this simple measure would also provide the incentive of added flexibility to encourage people to save for the future and has no effect on the funding of schemes – it is a win, win, win situation. We would urge the Coailtion Government to consider early access and would be very keen to discuss our ideas with The Treasury at the earliest opportunity.”
For more on research on occupational pensions