Warning on early pensions access

27 February 2011 Last updated at 11:06 GMT It's thought that 7 million people don't save enough for their retirement Plans to let people take money out of their pensions in their 30s could increase dependency on the state, according to one industry group.

The National Association of Pension Funds (NAPF), which represents 1,200 schemes, says the proposals could leave people short of funds in retirement.

The government is keen to consider the idea of early access, to encourage more people to save for their pensions.

Ministers will examine the results of a consultation before making a decision.

'A huge upheaval'

At the moment only those who are older than 55 can access their savings with a company pension scheme. The government thinks people should be able to access them in their 30s.

The Chief Executive of the NAPF, Joanne Segars, warns that letting people dip into their pensions would be "a huge upheaval for pensions funds, for really very little benefit."

"There is little evidence to show that giving people early access would either increase the amount people save, or get them saving in the first place", she says. "We think this could be very, very confusing for individuals."

Continue reading the main story

People feel... that by putting money into a pension that money is confiscated from them, because they can't get it back until they are in their 50s”

End Quote Dr Ros Altmann Saga group The Association thinks that taking out a small amount could leave a large hole in final pensions, leaving people reliant on the state. It also warns that more complex administration could drive up the cost of having a pension.

The government says it is committed to encouraging saving, and wants to give individuals the maximum flexibility and responsibility to save for retirement.

In a statement it said: "Early access is an idea the government is keen to consider. An informal consultation closed on Friday and the government will now make a decision on whether to develop more detailed proposals in the light of the responses received."

The Director General of the Saga group, Dr Ros Altmann, thinks the proposed change is an "absolutely excellent idea".

"The problem we have at the moment is people feel, certainly if you are in your 20s and 30s, that by putting money into a pension that money is confiscated from them, because they can't get it back until they are in their 50s."

She said: "There are lots of people at the moment who have got tens of thousands of pounds in a pension fund who are having their houses repossessed, because they can't get the money."

The Department for Work and Pensions estimates that around 7 million working age people are currently not saving enough for their retirement.

View the original article here

Bank member seeks early rate rise

21 February 2011 Last updated at 15:51 GMT Mr Weale warned that the recent rise in inflation could become self-perpetuating A member of the Bank of England's interest rate-setting committee says the central bank should start raising rates now to avoid a sharp rise later.

"[It would] protect us from a squeeze later on, needed to get people's inflation expectations back towards the 2% target," Martin Weale said.

He told the BBC that even with a rate rise, inflation would not fall quickly.

The Monetary Policy Committee member has joined colleague Andrew Sentance in voting for a rate rise since January.

The two economists are concerned by the recent run-up in inflation, boosted by commodity prices and the increase in VAT.

The Consumer Prices Index rose at an annual rate of 4% in January, twice the Bank of England's official target.

"I certainly wouldn't expect raising interest rates in the short term to bring the inflation rate rapidly back to target," Mr Weale told Radio 4's World at One programme.

Inflation could only be brought down quickly via a much more rapid rate rise, which he did not favour as he believed it would destabilise the economy.

Although inflation has been boosted in recent months by temporary factors, Mr Weale expressed concern that this could feed into people's expectations about future inflation, making price rises self-perpetuating.

"If businesses and people bargaining for wages expect high rates of inflation then there's a risk that they may build those expectations into their current behaviour," he said.

View the original article here