The government has confirmed that the minimum age for accessing a pension will increase from 55 to 57 in 2028.
In a written question to Parliament, Labour MP Stephen Timms asked the Chancellor of the Exchequer what plans he has to increase the minimum age at which people can access their private pension under the tax rules.
In response, Conservative MP John Glen said: “In 2014 the government announced it would increase the minimum pension age to 57 from 2028, reflecting trends in longevity and encouraging individuals to remain in work, while also helping to ensure pension savings provide for later life.
“That announcement set out the timetable for this change well in advance to enable people to make financial plans and will be legislated for in due course.”
Steven Cameron, pensions director at Aegon, commented: “The Government has confirmed it is to proceed with an increase in the age at which people can access their pension. Currently, under the hugely popular pension freedoms, individuals can access their pension from age 55. This is to increase to age 57 from 2028.
“The Government did indicate back in 2014 its intention to do this, but didn’t include provisions in legislation, leading to uncertainty over whether the change was still planned. This latest announcement confirms the change will happen meaning those retiring in future will have to wait longer to access their pension. It will be particularly impactful on those who were due to reach their 55th birthday just after the cut off, sometime in 2028.
“It’s now imperative that both Government and industry make sure this change is clear to all those saving in pensions. We can’t afford a repeat of the Government communication gaps which left many women to find out too late that their state pension age was increasing from 60 to 65.”
Jon Greer, head of retirement policy at Quilter, added: “This will be a blow to some savers that had hoped to retire at 55. A few diligent pension savers are lucky enough to be able to afford to retire at 55 with a pension pot sufficient to last the rest of their lifetime. But in future that age will switch to 57 before savers can unlock their tax free cash and income from a retirement fund.
“Designed as a safety valve in the pension system, the minimum age for accessing a pension is intended to prohibit people from withdrawing too much of their pension too soon. Part of the trade-off for receiving pension tax relief and the perk of tax free cash is that savers have to commit to keep their money locked up till their mid-50s.
“Until we know exactly when the change will be implemented it is difficult to say with certainty who will be caught, but the cut-off point is probably going to be around those born in the early 70s and later.
“For those super savers that can afford to retire early, they might need to revisit their plans if they still hope to finish work at 55. Other tax advantaged savings like ISAs may be needed to bridge the gap before private pensions become accessible. Anyone considering retiring this early really, really needs to speak to a financial adviser in order to ensure it is a financially sound decision.”
By Rozi Jones (Financial Reporter)