Irish government urged to allow early access to pension savings
IRELAND - The Irish government is being urged to allow pension fund members a draw down as much as 25% of savings ahead of retirement, in an effort to reinvigorate the pensions market - a move that could also allow schemes to de-risk, Aon Hewitt has said.
Speaking in parliament at the Committee on Jobs, Social Protection and Education, joint managing director of insurance brokerage First Ireland Linda Gallagher argued that the approach would be beneficial to members, as well as the economy, at a time when middle-income earners were struggling with debt.
She told the committee that allowing as much as a quarter of pension savings to be drawn down in advance of retirement as a tax-free lump sum could be "very useful".
She added that there had, in the past, been much in the way of negative press surrounding pensions and that the inability to access savings ahead of retirement age acted as a "major disincentive" for many to save.
"If they had some access to tax-free cash, this would act as a major incentive for people to invest further in their pension funds for retirement," she said.
Irish unions have previously commented on the problems facing pension schemes in the wake of the economic downturn, with contributions falling as household budgets are squeezed and workers are made redundant.
Philip Shier, senior actuary at Aon Hewitt, agreed with Gallagher's assessment that new lump-sum regulations could increase interest in pension savings, as well as offer the country's defined benefit (DB) schemes a way to address funding issues.
"From a funding perspective, depending on what the exchange rates are, DB schemes might be quite happy to de-risk by people taking cash in lieu of a lifetime pension they have to guarantee over the next 30 years," he said.
Gallagher received support from the committee about her proposal, with Fine Gael TD Mary Mitchell O'Connor saying she had previously raised the idea with the Department of Finance and was "delighted" to have further support.