The government has confirmed that the minimum age for drawing a personal pension is to rise to 57 in 2028.
Savers who pay into a personal pension either directly or through their workplace can currently access their money at 55. However, the government plans to raise the age as a result of increased life expectancy.
The change hasn’t yet been brought into law, but Treasury Minister John Glen has confirmed there are plans for legislation.
In parliament, he 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.”
The change will affect workers currently aged 47 and under, and was first announced by then chancellor George Osborne.
As chancellor, George Osborne significantly changed the way we can access our pensions.
He brought in rules that allowed retirees more access to their personal pensions, removing both the limit on cash withdrawals and the requirement to buy an annuity to ensure a secure retirement income.
Opponents to the rise in pensions age claim that the changes restrict workers’ freedom to retire. The changes will make it more difficult for some to retire sooner.
One investment analyst has described the change as a “kick in the teeth at a time when many people are reassessing their work/life balance after a terrible year socially, emotionally and economically.”
However, others believe that the changes are a positive step because they give people two years more to pay into their pension funds. They argue that this will increase the chances that retirees will have enough saved in their pension pots to provide an adequate level of income for the remainder of their lives.
Those who were planning to access their pensions at 55 but can no longer do so could look at other options. These could include saving into an Isa to fund the two year period before turning 57.
Most savers will agree that the government is right to give so much advance warning, unlike with the increase in state pension age for women from 60 to 65, which caused some animosity. These changes do not affect when you can claim your state pension.
Under current rules, you can spend the money in your personal or workplace pension from the age of 55. The first 25% is tax free, but the rest of the money is then taxed as if it were income. Pension pots under £30,000 can be cashed in without being taxed.
If you have any further questions around your pension pots, please get in touch.