Early Access to pension pot?

Elizabeth_Kelly

Hi All,

I have a question regarding the changes to the pension the government is bringing in. There was a lot of talk about being given early access to your pension pot say for instance if you hit hard times. What happened to this idea? Has it been dumbed just like many other grand ideas.

Also if you were given early access to your pension pot wouldn't this mean you would not be allowed to claim any benefits say if you lost your job because the pension would under this new rule be classified as your saving. Wasn't this new proposed change just a way to cut benefits payments?

What if any guarantee is there this rule wont be brought in at a later date or some other silly rules. Have lost all trust in this pension nonsense. Not sure wheather it is worth saving?

Liz

dunstonh

Has it been dumbed just like many other grand ideas.

Most of the grand ideas are going ahead still. In this case, allowing early access to pensions is probably a dumb idea. Although the proposals did have some pretty strong requirements to prevent it being used by people just looking to pay for a holiday.

Also if you were given early access to your pension pot wouldn't this mean you would not be allowed to claim any benefits say if you lost your job because the pension would under this new rule be classified as your saving.

Based on what happens with other tax wrappers..... you would expect it to be included as other tax wrappers that are not included in the means test do get the value of the withdrawal included if you take the money out of the tax wrapper. Its only excluded whilst its in that wrapper.

Wasn't this new proposed change just a way to cut benefits payments?

No. It was to allow people who got into debt and trapped in that cycle a way to get out of it.

What if any guarantee is there this rule wont be brought in at a later date or some other silly rules.

Crystal ball job. Many silly laws are brought it.

Have lost all trust in this pension nonsense.

Can you explain why as this hypothetical proposal with virtually no detail supplied should not have any impact. So far, most of the pension rule changes have been very good.

Not sure wheather it is worth saving?

Its your choice whether you want to be poor in retirement or not. Just don't expect the state to pay for your life choices in future.

jh2009

Elizabeth_Kelly wrote: »

Hi All,

I have a question regarding the changes to the pension the government is bringing in. There was a lot of talk about being given early access to your pension pot say for instance if you hit hard times. What happened to this idea? Has it been dumbed just like many other grand ideas.

Liz

These ideas had good intentions, i.e. to encourage younger people to save who may be frightened off by having funds locked away for 30-40 years. As we have seen on posts here theres always reasons for not saving (student debt, buying a house, children, etc) and this was thought as a way to deal with this.

The Government has been consulting with pension schemes, pension providers, professionals, etc and the general response is that it will increase costs for schemes, be an administrative nightmare, and that a pension is.... er well.... for retirement provision and not a piggy bank to pay for holidays, a new car, a new fridge, etc. Theres also the tricky question of how benefits would be adjusted, especially in final salary schemes.

I think the industry would therefore rather not have it, but if it ever happened they maybe could just about stomach it for exceptional circumstances only (eg to stop people losing their home, and who can prove this is really their final option). Such provision already exisits for early access for severe ill health, so doing this would I assume just extend this in some way to severe financial health.

Any payment out of the fund would also have an issue to deal with in respect of tax relief. I would certainly expect this to be reversed via a tax charge for any payments if people could use it to fund things like holidays otherwise its an obvious tax loophole.

One day the Government may make a decision on this, or it may kick it in the grass. Pension decisions are always usually badly taken by ministers as the consequences (or benefits) are usually only felt decades in the future.

Loughton_Monkey

It is an idea that was mooted in the press, but I have not seen any later mention of it.

My first reaction was 'non belief' since I cannot see the sense of it. Governments, as long as I remember, have tried [God know's they've tried] to get the masses to save for their retirement. The new "NEST" proposals are yet another 'initiative' aimed at this goal.

To allow someone to 'tap into' very tax-efficient retirement plans for short term requirements - leaving them financially naked at retirement, thus qualifying for benefits, is madness in the extreme in my opinion.

I have long argued for something more draconian. I would welcome some form of system that would deliver benefits in retirement not based on 'means' at the time, but based upon 'lifetime means'. Put simply, if you earned decent money, refused to save any, and blew the whole lot on a good lifestyle, I believe the rest of humanity should violently bulk against any form of benefits over and above state pension.

I can only hope that if this silly idea goes ahead, that it can be administered in the form of a "loan" on the pension fund. Not necessarily a 'loan' that would need repaying. But instead, if you reached retirement and 'qualified' for means tested benefits, then they should be nominally applied to repay the loan first. Only if/when that loan were written off should those benefits actually be paid in cash.