A higher minimum pension age – how it could affect your retirement plans

The Government is currently consulting on increasing the normal minimum pension age, whereby people can access their pot tax-free, from 55 to 57 in 2028.

Within the consultation documents put out by the Treasury, the Government has said that raising the minimum pension age to 57 could “encourage individuals to save longer for their retirement”, thereby giving them greater resources once they have finished working.

The changes being considered are meant to reflect the changes in life expectancy and quality of life in the population, as well as expectations around how long people can be expected to continue working.

A change to the age that savers can access their pension without incurring an unauthorised payments tax charge could have a big impact on many individuals’ current retirement plans.

For most, it will mean that they have greater funds to tap into during their retirement, which may mean that additional advice should be sought before drawing down on a pension or withdrawing it.

It will, of course, also force many workers to retire later, which may mean that they can ease themselves into retirement more easily by reducing their working hours until they reach the state pension age, which will further support their income.

However, for those with clear plans in place to retire early by the age of 55, such a change may mean that they need to build up additional savings outside of a pension if they still intend to retire early.

This may need careful financial planning, especially given the low rates of interest on many investments and bonds currently on the market.

Several experts have pointed out that this change may also look to align pensions more closely with the access age of Lifetime ISAs (LISA), which is currently 60, suggesting that the Government is trying to keep people in full or part-time work for longer.

Links: Increasing the normal minimum pension age: consultation on implementation

Posted in Wealth Management News.