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Briefing Notes

Briefing Note 101 - Using accessible pension savings to provide a financial safety net

This Briefing Note considers the impact on pension income of a debt prevention measure suggested by StepChange Debt Charity. The proposal, which would be integrated into the pension system, involves diverting part of pension savings into an Accessible Pension Savings fund. StepChange’s research indicates that £1,000 of accessible cash savings could reduce the likelihood of someone falling into problem debt by 44%. Incorporating cash saving into the automatic enrolment pension system may help encourage some lower-income workers to put money into non-pension savings.

The Briefing Note discusses the policy proposal and models the potential impact on pension outcomes of individuals, and the potential issues that could arise in implementation.

The note finds that diverting  contributions to Accessible Pension Savings is likely to lead to a lower private pension income in retirement,however if the alternative is to cease contributions for one automatic enrolment cycle of three years, ceasing contributions could be more detrimental than taking the full accessible pot once. Nevertheless, there are several issues regarding implementation relating to tax issues, difficulties in how the system would be incorporated in to schemes, and access criteria. 

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