Changes to pension access

08.12.2020
Ricky Banham
Financial Planning

Following our article in October, where we advised that the State Pension had officially increased to age 66, we wanted to take this opportunity to position further changes announced around private pension access – that were shared in September.

Under the current ‘pension freedom’ rules, individuals over the age of 55 can access their pensions - how and when they choose to do so; however, the government has recently confirmed that this is set to rise to age 57, by 2028. This means the change will impact all workers currently under the age of 47. If this affects you, you might be deliberating how it will impact your retirement plans.

The minimum pension age will rise from age 55 to 57 in 2028

In April 2015, the government introduced ‘pensions freedom’, and this afforded holders of Defined Contribution schemes greater flexibility with their pensions; such as, being able to make withdrawals from the age of 55 – for example.

In 2014, the government proposed a change to the private pension age, but did not enact it, leaving many to speculate whether the proposal would actually take place. Now, the government has confirmed that the minimum age for making withdrawals from a Defined Contribution pension fund is set to rise from 55, to 57 in 2028.

The plans have not been brought into law as of yet, but John Glen, the Treasury minister, has confirmed that the changes are set to be legislated/ In answer to a parliamentary question, 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.”

 

Why has the government changed the pension age?

The government have said that it is raising the pension age to encourage individuals to stay in work, and ensure that their pension savings provide for them throughout retirement. By raising the minimum age by two years - this will mean that workers are paying into their pensions for longer, and the retirement pot will have to last two years less, in retirement.

What the change means for you?

While you may be facing the prospect of working an extra two years than you had anticipated, there is at least a break in the sky to this change. Working for two extra years could mean that your pension will be boosted with two extra years of contributions, which in turn, could mean your pension pot will be able to support your planned retirement lifestyle.

If you had hoped to retire at age 55, you may need to revisit your retirement plans. Speaking to a financial adviser at Lovewell Blake Financial Planning can help you reassess your retirement plans, in view of the change, and help you plan for your retirement accordingly.

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