Early access to pension assets a mistake, warns Mercer
UK - Giving savers access to their pension fund before retirement would be a mistake, according to Mercer.
The warning came after the UK coalition government said in its Programme for Government document that it would explore the possibility of giving people "greater flexibility in accessing part of their personal fund early".
But Mercer said research it carried out across 11 major national pension systems showed early access - or 'leakage' - actually undermined efforts to provide adequate financial resources for retirement and eroded the goal of any retirement system.
In particular, early access has hindered efforts to provide sustainable and adequate retirement provision in Canada, Chile, China, the Netherlands and the US, according to Mercer's Melbourne Global Pensions index, issued in October last year.
The report was the world's first comparison of public and private retirement systems and examined common and desirable characteristics of retirement income systems.
It is used to guide government policies on best practice pension provision.
Bruce Rigby, global retirement strategist at Mercer, said: "Allowing members early access to their accumulated savings is a politically popular policy, but there is a sting in the tail.
"In countries where such leakage occurs, these payments are rarely paid back in full.
"This can lead to a lack of sufficient funds in retirement and a greater call on government funds."
Rigby said the problem arose because most people underestimated how much they would need for their retirement or how long they would live.
"Those capitalising on 'early access' risk being unable to purchase adequate retirement incomes or running out of money in old age if they don't annuitise," he said.
"Financial responsibility to care for these people then falls back on to the state and taxpayers."