Call to release pensions early for needy
HEAVILY indebted households should be able to get early access to their pension funds to get themselves out of a financial hole, TDs were told yesterday.
Thousands of people, who are struggling to meet day-to-day expenses, have money locked away in pension funds but strict rules mean they cannot access this pot until they hit 65, the politicians heard.
The Irish Brokers Association (IBA) yesterday told an Oireachtas committee that the rules should be relaxed to enable debt-distressed families use their pensions to pay their mortgages.
Such a scheme could unleash €1.5bn in funds and dig 50,000 borrowers out of financial trouble. There would be no cost to the Exchequer, the IBA told TDs and senators.
Meanwhile, Finance Minister Michael Noonan last night vowed to give consideration to proposals for people in debt to be allowed access some of their pension money early.
"I'd be open to that alright," Mr Noonan told Today FM.
"The other side of the debate is that if you enable people who are under debt pressure to access their pension, they'll end up with no pension provision for their old age...
"I'm not turning it down completely, but on the run-in to the budget there were a number of things about pension provision that we needed to discuss more fully."
More than 150,000 people are in trouble with mortgage payments, while thousands more have run up huge debts with credit-card companies and credit unions which they are unable to service.
The pension rules are preventing householders from extricating themselves from a debt sentence, the IBA's Aidan McLoughlin said.
The average size of private pension funds was €120,000, the committee was told. With half of workers having pensions, this means €1.5bn could be released.
"Every day our members are meeting with these indebted people who want to pay their debts but do not have the capital or cashflow to meet their commitments," he told the Oireachtas committee on jobs, social protection and education.
"Many of these clients have funds built up in their pension schemes through years of prudent saving. However, these funds are locked away until retirement age and can provide no assistance to them."
Mr McLoughlin said that at retirement people are allowed take 25pc of their pension fund as a tax-free lump sum, up to a maximum of €200,000.
But retirement age may be too late as thousands of people need these funds now to remain solvent, he said.
The IBA called for people be allowed access to this tax-free lump sum during their lifetime rather than restricting it to retirement.
There would be no cost to the State as householders would still not be allowed to take more than €200,000 tax-free out of their fund over their lifetime.
Committee chair Aodhan O Riordain said there needed to be safeguards in place to ensure that people are not dissipating an already inadequate fund.