Many of the home-owning Personal Pension savers in the late 1980s and early 1990s started building up tax efficient pension funds from which their mortgage loans were to be paid off using the lump sum, with the remaining fund to provide their income in retirement.
With the 25th anniversary of personal pensions arriving in July 2013, any removal or restriction of the lump sum will see many at retirement unable to pay off their mortgage debt and thus face selling their family homes. The lump sum is also commonly earmarked for essential home improvements for retirement, paying off family debt and funding school fees for grandchildren.
Simon Bonnett, Head of Wealth Management at Fiducia Wealth Management in Colchester urges common sense. ‘The law of unintended consequences may well prove calamitous for new pensioners if the lump sum benefit is removed or restricted. We urge the Government to think wisely and not to implement any more major reforms that would put people off saving, especially with NEST only one month old ’.