One Labour MP has come up with an idea for early access to State Pensions for the under-40s which some have labelled as crazy. But is it really that off the wall?
The idea is fairly simple: allow under-40s, who have paid in at least 10 years of National Insurance, to withdraw a year’s worth of State Pensions – £12,548 – to help them meet current financial challenges.
In return, they would forego a year of State Pension when they are older.
Critics have called the idea unworkable and suggest it may lead to a wave of early withdrawals and undermine the State Pension. This is a risk, to be fair.
But unlocking the State Pension early, apparently a popular idea with 25 to 40 year-olds, would have some benefits. Younger people would be able to use the money for debt repayment or housing costs to their long term benefit. And it is undoubtedly their money.
So could it work?
The jury is out. In principle I am opposed to early access to pensions as generally a bad idea but perhaps with strict safeguards it could work.
I would rather the age for early withdrawal was pushed up, however, to 50 or 55 – when people are nearing retirement and some early access to pensions could help clear a mortgage or be used for other benefits. They may also be better able to consider the consequences.
A bigger question is the unfairness overall of the State Pension, which I’ve long criticised as unfair to many and not fit for purpose.
It simply cannot be right for pension savers to pay 35 years of National Insurance and then get nothing if they die before they reach an ever increasing State Pension age, which is already heading up inexorably towards 70 and is currently 66, soon to be 67.
People on lower incomes and in manual jobs have a significantly lower life expectancy, on average, than someone living a comfortable middle class lifestyle in a professional job but get a raw deal from the State Pension.
Why should a builder who has paid NI for 35 years be robbed of any State Pension if they die early when the people they are building homes for will likely benefit from many years of the State Pension?
The government-backed Pensions Commission is looking at the adequacy of pensions and retirement incomes.
A thorough review of the State Pension and its fairness is long overdue and must be part of the review. Early access too, should be considered.
Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email:
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