‘Block savers from accessing pensions until 60’
The Committee believes that allowing retirees to unlock their pension from 55 stimulates “unrealistic expectations” about the age at which people will be able to afford to stop working. It went on to recommend that access should only be extended five years before the state pension age.
This means men would have to wait until age 60 to withdraw their funds, women 57; however, this would rise to 62 for both men and women in the next ten years, in line with increases in the state pension age. Exceptions would be made for retirees in poor health, with shorter life expectancies.
“Our view is that, given the significant tax relief provided to pensions, increased longevity, and the importance of ensuring people do not underestimate the income needed in retirement,” said Dame Anne Begg, Labour chairman of the committee, “the minimum age at which people can access their pension saving, except on ill health grounds, should rise to five years below the state pension age.”
Begg also warned that savers were in danger of being “ripped off” by poor value, mis-sold products when the new freedoms come into effect in April. The Financial Conduct Authority welcomed the report’s conclusions, stating the regulator is “absolutely committed” to ensuring pensioners were protected from the risks the committee “rightly identifies.”
Begg concluded the report by endorsing the introduction of a new independent commission, to assume responsibility for deciding the age restrictions on pension withdrawals. The proposal was welcomed by David Sinclair, director of the International Longevity Centre.
“Despite the success of auto-enrolment we face a long term savings crisis. While growing numbers of us are saving, the levels are severely inadequate,” Sinclair said. “A ‘new normal’ of low investment returns combined with low real wage growth is repressing savings levels and presenting a significant risk of long term pensioner poverty.”
“Raising savings levels in the current economic climate is a challenge in itself but it has been exacerbated by policy uncertainty. It is critical that whatever future steps are taken, they are well thought through, based on consultation with a variety of stakeholders and appropriately communicated to the general public. A new Commission should start work as soon as possible after the next election and take a holistic view of UK retirement income policy.”