However there should obviously be a limit to the amount that may be withdrawn and the frequency

However, there should obviously be a limit to the amount that may be withdrawn and the frequency of withdrawal … If pension funds were accessible, people may be prepared to contribute more as they would know they could get at their money. No one knows what their circumstances, their health or wealth is likely to be when they retire, or how long they might live to enjoy the pension they have paid for.The ability to access capital could lead to a short-term attitude, rather than disciplined long-term retirement planning. Costs are also incurred in administration and fund management. Clients would not welcome cost- cutting at the price of poor administration or inferior fund management.People are, however, frightened of making long-term commitments.

Money invested in a pension fund in most cases cannot be reclaimed to meet other financial needs. It should be remembered that not all costs are commission and marketing. Industry-based schemes might be run by unions or employer organisations and local schemes possibly promoted by chambers of commerce.Labour have criticised the high charges in personal pensions and would like to lure potential pension policyholders into these proposed new low- cost funded schemes. The accusation that 25 per cent of a personal pension fund is swallowed up in charges has been met with some criticism within the insurance industry.

The apparent cost is a result of the action of compound interest and hence distorted by time. These schemes would take more than one shape and could be administered in several ways by insurance companies. The aim is to provide better value for money for people who do not have access to company occupational schemes, through new low-cost funded schemes. Why force people through this tortuous process when the aim is to encourage people to provide for their retirement? Is there really a need for personal pensions and FSAVCS? Why not have a unified structure?The Labour Party has proposed a new second-tier pension. Why persevere with complicated artificial limits when, for most people, a finite disposable income sets a real limitation on contributions?Why force people to stop their personal pension because they join a company pension scheme? Company scheme members can contribute to a free-standing additional voluntary contribution scheme (FSAVCS) which is similar, but is governed by different legislation.