Industry figures are re-examining the need for early access in pensions, in the run up to the arrival of the Lifetime Isa on the market in April 2017.
As it currently stands, only in limited circumstances can people access their pension prior to age 55, such as in cases of severe or terminal ill health.
In June last year came renewed calls for early pension access in cases where there is financial hardship, however providers at that time warned this could exacerbate poverty in retirement.
In May this year, FTAdviser reported key industry figures were staunchly opposing Treasury plans to allow Lifetime Isa investors early access to their savings without penalty so long as they pay the cash back.
However, despite being potentially difficult to administer, some in the industry believe early pension access should be reconsidered.
Tom McPhail, head of retirement policy at Hargreaves Lansdown told FTAdviser the company believes early access "principles are still valid" and said it was "worth revisiting and exploring" within the context of pension freedoms and the Lifetime Isa.
He said: "Our recent proposals to pension and Isa reform included proposals for house purchases, but did not have financial distress."
Mr McPhail added, however, there are many complexities around early access for pensions.
He raised four main considerations; how the industry makes sure the system does not get abused; whether it would require that money is paid back akin to the North American 401K system; how workable it is as an operation and how eligibility would be policed administratively.
Former pensions minister Steve Webb, now director of policy for pension provider Royal London, said in the short term the industry could do without another big upheaval in pensions, but in the medium term early access should be explored.
He added this would avoid the current situation where people may feel they have to choose between pensions, where there money is tied up to age 55, Isas with instant access, or Lifetime Isas with some immediate access, some access with penalties and some access at 60.
Mr Webb said: "The 2010 Coalition agreement committed the last government to look at early access and the Treasury undertook a consultation early in the last parliament.
"There wasn’t a lot of enthusiasm at the time, I think mainly because auto-enrolment was about to start and the industry didn’t want to have to cope with a big change to the product at that stage, which was understandable. I think the mood might be different now."
"My personal view has always been that access to up to 25 per cent of the value of a defined contribution pot might strike the right balance between giving people flexibility and making sure that they are still saving for the long-term.
He added there are a number of factors for consideration, such as whether money borrowed should have to be repaid, and whether access should only be for approved reasons, such as to buy a house, for poor health, change in family circumstances.
Mr Webb said his preference would be to "keep things simple", with a general power to withdraw up to 25 per cent.
"This might encourage young people to save in a pension, rather than opt out and go for a Lifetime Isa, and might work well for the self-employed who would value the added flexibility.
Former pensions minister Baroness Ros Altmann said early access to pensions "does have some merit" but added it would be administratively complicated.
She said: "My proposal was that, if we do need to allow people early access, perhaps in certain circumstances such as for house purchase, student debt repayment or illness costs, then only the individuals’ own contributions should be permitted to be withdrawn.
"Any tax incentives or employer contribution should be locked in. There would presumably be a cost for withdrawal as administrative complexity is being added."
Baroness Altmann said it was clear people are not saving enough, and if early access encouraged saving then it could be helpful.
"However, if they only save in cash, rather than long-term assets because they may need to withdraw funds, then the overall position could be worse in future."
ruth.gillbe@ft.com
