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Allowing early access to funds 'may increase pension saving'

More people could save larger amounts in their pension schemes if they are allowed limited early access to the funds, according to a new study.Research by the Pensions Policy Institute (PPI) found that allowing people to take cash from their pension under special circumstances, for instance to purchase a house or during financial hardship, could prove beneficial to their retirement income.However, the PPI warned that if restrictions are not placed on the withdrawals, their retirement income may suffer.PPI research director Chris Curry mentioned the 401(k) system used in the USA as an example of the system, where only 20 per cent of people use the "early access facility" annually, but both the number of people saving and the amount are increased."If a similar system were introduced in the UK, this could increase aggregate pension savings by around 30 per cent by 2050," he said."However, if people in the UK didn't increase their contributions, or didn't repay their loans, then pension funds could be seven per cent lower."

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