Pension freedoms age to rise to 57: how could this impact you?

Last month, the government confirmed that the minimum age from which people can access their pension savings is to rise from 55 to 57 in 2028. If you’re wondering what this could mean for your you and your pension freedoms, then continue reading.

What are Pension freedoms?
In 2015, the government announced a major change for pensions in the UK. The focus was on providing greater pension freedom and giving people the opportunity to select what type of pension they wanted.
Before the changes were made, pension options were limited. Now, you’re free to select from the following choices:

• Leaving your pension as it is (e.g. as a workplace pension)
• Receiving an adjustable income when you retire (called a Flexi Access Drawdown)
• Buying an annuity
• Taking the funds in chunks (called an Uncrystallised Funds Pension Lump Sum)
• Cashing in the entire pension fund in one lump payment
• A combination of any of the above

Why is the government increasing the pension age to 57?
The government has said it is increasing the minimum age to 57 in reflection of trends in longevity, in order to encourage individuals to remain in work so that pension savings provide for later in life.

How could the increase impact you?
From 6 April 2028, the Normal Minimum Pension Age will increase to 57. So, from 6 April 2028 you’ll need to be aged 57 or older before you can start taking money from your pension.
There are still some circumstances where you can take money earlier, like if you’re suffering from ill health or have a protected pension age.

What’s a protected pension age?
There are two types of protected pension age:

• A protected pension age of 55 or 56. This will apply when the Normal Minimum Pension Age increases to 57 on 6 April 2028
• A protected pension age of less than 55

If you have multiple pensions, having a protected pension age for one of them doesn’t mean you’ll have a protected pension age for all of them. You’ll need to check each individual pension.

     1. A protected pension age of 55 or 56

When the new NMPA comes into force, you might qualify for a protected pension age of 55 or 56, depending on the details of your pension scheme.
If you do qualify, your protected pension age will most likely be 55, which means you’ll need to be 55 or older to start taking money from your pension.
You’ll have this type of protected pension age if all the following apply:

• You had money invested in a pension scheme (an occupational or a personal pension) on 3 November 2021
• The rules of that pension scheme gave you an unqualified right to take your pension savings from an earlier age than 57
• Those rules were in place on 11 February 2021

You may also have a protected pension age of 55 or 56 if:

• You transferred from a pension scheme that meets the conditions above as part of a block transfer (a transfer with at least one other member) to a new scheme after 11 February 2021. Your protected pension age will transfer from the old scheme to all your pensions savings in the new scheme
• You transferred into a scheme that meets the requirements above on or before 3 November 2021 (or signed the paperwork before 3 November 2021)
• If you transfer pension savings on an individual basis (instead of a block transfer) from a plan that has a protected pension age to one that doesn’t, the protected pension age might still apply to the transferred pension savings. However, this will depend on the terms of the pension scheme you’re transferring into.

What does that all mean?
In short, a protected pension age of 55 or 56 means you can take some, or all, of your pension from that earlier age, even after the NMPA increases to 57. You don’t need to take all your pension savings at once, and you don’t need to stop working.

     2. A protected pension age of less than 55

This allows you to start taking money from your pension before you’re 55 if all the following apply:

• You were a member of an occupational pension scheme on 5 April 2006
• The rules of that pension scheme gave you an unqualified right to take your benefits from an earlier age than 55
• Those rules were in place on 10 December 2003
• If you qualify, your protected pension age will most likely be 50, which means you’ll need to be 50 or older to start taking money from your pension.

You may also have a protected pension age of less than 55 if:

• You had a retirement annuity contract or personal pension scheme on 5 April 2006 and
• You were in a prescribed occupation (for example, a sportsperson) with a particular early retirement age, generally between 35 and 45, and your chosen retirement age under the plan was before 50

What does that all mean?
In short, a protected pension age of less than 55 means you can take your pension from that earlier age, even after the NMPA increases to 57. However, you must take all your pension savings from the scheme where you have the protected pension age. Plus, if you’re a member of an occupational pension scheme you may also need to stop working.’

How to plan for retirement
Despite the increase in the pensions freedom age, there are still many options to help you prepare for retirement when it happens.
We are specialists in range of pension products and can you identify the right pension for your financial situation. Call us today on 016973 25852  to find out more.