Warning on early access to pension nest eggs

ONE OF the country’s most senior civil servants has said that it does not make financial sense to allow people to access their pension nest eggs early to allow them to reduce heavy mortgage debts.

Department of Finance secretary general John Moran told a pensions conference that officials had looked at this but rejected it as a way of tackling high debt levels.

“It’s very superficially attractive but, when you actually get down into the detail, you find that the complexity of unravelling that further benefit that you get doesn’t seem to stack up,” he said at the conference hosted by State-owned pensions company Irish Life.

Mr Moran said it did not make sense when it came to trying to strike a balance between encouraging people to save more for the future and trying to help people out of current financial difficulties.

Gerry Hassett, chief executive of Irish Life Retail, said there were situations where early access to pensions made sense and that while tapping them was complex there was “a way through that”.

“There is no point in raiding the piggy bank today and creating an even bigger problem for the future. I think the issue is whether at the margins in certain situations it makes sense,” said Mr Hassett.

Mr Moran said suggestions the Government should release the pension levy to encourage investment in the economy was “missing the point”. The focus should be on developing investment products that allow the pension industry to fund infrastructural projects.

“If the domestic life and pension industry increases their investment in Ireland it will make my case more compelling in explaining to international players why they also should be giving consideration to doing similarly,” Mr Moran said.

He said it was “noticeable” that domestic funds were not investing in the Irish economy as much as funds in other countries.

Officials were considering ways of attracting pension fund cash into long-dated projects of up to 25 years to match those up with long-term pension assets, he said.

Mr Hassett urged the Government to consider capping pension tax relief for higher earners instead of cutting all higher-rate tax reliefs.He referred to a survey of customers at Irish Life, the country’s biggest pensions company, in which 43 per cent said they would reduce pension contributions or cut them fully if tax relief was reduced to the standard rate.

This would have a “devastating” impact on retirement planning in Ireland and increase the burden on the State “to breaking point”.