Proposals to allow early access to pension funds are rejected
Published 14/02/2012 | 05:00
PROPOSALS to allow heavily indebted households to get early access to their retirement savings have been dismissed by the Government.
Thousands of people who are struggling to meet mortgage repayments have money locked away in a pension. They cannot touch this money until they reach retirement age.
The Irish Brokers Association told an Oireachtas Committee last week that allowing people early access to their retirement savings would encourage people to save as the money would be more freely accessible.
But Jobs, Enterprise and Innovation Minister John Perry said the suggestion was not desirable, as it "ran counter" to current proposals.
The minister argued that pension savings should be viewed as a long-term investment and "locked away until retirement".
"Early withdrawals of pension savings are not permitted or desirable for several reasons," he said, arguing that the tax relief granted on any such savings was meant to provide for the member in retirement.
He added: "Allowing access to pension savings before retirement or pension age would be a significant change to pension policy and the basis of pension savings in Ireland."
Mr Perry conceded that the option of allowing early access to increase spending power was attractive, "particularly at the moment".
"However, the resulting reduction in pension savings could have significant negative consequences in the long term and in particular it fails to address the group who may be most affected by personal debt or mortgage arrears," he said.
The minister added that younger savers were unlikely to have "significant" savings and in a climate where pension funds had seen negative returns over the past years, early access would represent "very poor value for money".
"There is no guarantee the funds could be repaid or that people could make up these losses. Where people are close to retirement, an early withdrawal of funds could significantly diminish the pension they receive as they may not have time before retirement age to fill the gap left by such a withdrawal."
He reiterated the government's support for increasing pension fund coverage -- which he said was currently at 51pc -- with the introduction of automatic enrolment and a "national employment savings scheme".