Pension age going up
The government has recently confirmed that it will increase the age at which an individual can take their private pension savings at the same rate as the increase in the State Pension age. In order that people have time to plan properly, the government proposes to wait until 2028 (when the State Pension age will rise to 67) to fully implement this change.
This means that from 2028, people will not be able to draw their private pension benefits without a tax penalty until age 57 (it is currently age 55), whether or not this is the point at which they stop work. From then on, the minimum pension age in the tax rules will rise in line with the State Pension age so that it is always ten years previous to the prevailing state pension age.
Whilst the government had been silent on this change for some time, this month John Glen, Conservative MP and Economic Secretary to the Treasury, confirmed in a written parliamentary answer to a question from Labour MP, Stephen Timms that the minimum pension age will rise to 57 from 2028.
In this response, John Glen stated:
“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.”
Whether the change will be a ‘cliff edge’ one remains to be seen, but this seems likely based on past experience. When the minimum pension age increased from 50 to 55 on 6 April 2010, a member had to crystallise benefits before that date to avoid being affected by the change to 55. If someone had placed funds in drawdown before 6 April 2010 they were able to buy a lifetime annuity after 6 April 2010, even if they were still under 55.
The only time a member can access their pension benefits before minimum pension age is if they are in ill-health, have a protected pension age or have a certain specified occupation. Apart from this, pension providers are very conservative and will not allow you to withdraw funds prior to minimum pension age as they would be classed as an unauthorised payment and subject to hefty tax charges.
If you would like help or advice regarding your pension plans, please contact our team.