It’s obvious that the pension system is in dire straits and within the talks and discussion of concerns; many people are sharing ideas that could revamp & re-ignite the pension system.

Recent research found that only half the working population belong to an occupational pension scheme and that over 50% of employers offering a defined contribution plan found that the majority of their staff failed to even sign up for it, even when the employer is making a contribution. What is the turn off from pensions and what (if any) is the turn on?

Could the following idea be the ON switch?

There have been a number of blogs and reports talking about changing the pension rules to make pensions more useful to people throughout their working lives and not just in retirement. The idea is simple and has got a lot of people talking.

The basic idea is that, at any age, individuals who have reached a certain level of pension fund should be allowed to draw down some of the tax free cash of their pension pot. Sounds great! But will the government go for it?

The Savings Gateway (created by the government) is an initiative to help individuals save up a lump sum of money. The aim is to help people to cope with the difficulties in life with having an accessible sum of cash. A change in the pension rules that allow for early access to the fund, as tax free cash, would also achieve the same result the government is looking for with the Savings Gateway.

The new rules would also work well with the new pension initiative in 2012. The so called government ‘Personal Accounts’. In 2012 all employers in the UK will be forced to be actively involved in the process of getting their employees auto-enrolled in a pension scheme. If they don’t have one, the government will create a ‘Personal Account’ scheme as a default pension.

Employees just don’t appear to want the hassle of saving into a pension for one reason or the other. Maybe the new rule changes (if implemented), would encourage a much higher percentage of employees to sign up for a pension, increase their pension savings or act and take matters into their own hands.

There’s more chance that more people will sign up for a pension in the first place if it also acts as a safety net of cash should you need it throughout your life.

This new rule idea has popular in the recent downturn of the economy and the feedback has been overwhelming. It appears that the majority of people would see the value of such a relaxation in the rules and welcome it. It’s understandable that there will be deeper complications that these initial reports are not highlighting. However it is still easy to imagine that many people will be encouraged to save more in pensions if such a benefit of tax free cash came as standard.

Maybe it’s not such a wild idea that a change in pension rules may aid in the recovery of the economy in some small way.