Pension freedoms age to rise to 57: how could this impact you?
THE VALUE OF PENSIONS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED.
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?
The main thing that is changing is the age from which you can access your pension pot. The rules around unlocking the cash (outlined above) stay the same.
What isn’t clear is how the government will implement the changes. In order to explore the different options and how they might affect you, we’ve outlined two possible scenarios below.
If the changes happen on a specific date
Steven Cameron, Pensions Director at Aegon UK has said “it may be that the change will happen on a fixed date such as 6 April 2028, the beginning of the tax year.”
If this is the case, anyone who has their 48th birthday before 6th April 2021 will still be able to access their pension from age 55. Anyone born younger will have to wait another two years until they can withdraw an income from their pension
If the changes are phased in
Another option is to phase in the change in a similar way to the gradual increase in state pension age.
This could see the minimum age gradually increase month at a time from the current age of 55 to 57, with people currently in their late 40s eligible to draw pensions at different ages based on their date of birth. As Cameron says, “this avoids a ‘cliff-edge’, but would be complex to communicate.”.
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.
Lighthouse Financial are specialists in range of pension products and can you identify the right pension for your financial situation. Call us today on 01697 325852 to find out more.
THE VALUE OF PENSIONS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED.
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?
The main thing that is changing is the age from which you can access your pension pot. The rules around unlocking the cash (outlined above) stay the same.
What isn’t clear is how the government will implement the changes. In order to explore the different options and how they might affect you, we’ve outlined two possible scenarios below.
If the changes happen on a specific date
Steven Cameron, Pensions Director at Aegon UK has said “it may be that the change will happen on a fixed date such as 6 April 2028, the beginning of the tax year.”
If this is the case, anyone who has their 48th birthday before 6th April 2021 will still be able to access their pension from age 55. Anyone born younger will have to wait another two years until they can withdraw an income from their pension
If the changes are phased in
Another option is to phase in the change in a similar way to the gradual increase in state pension age.
This could see the minimum age gradually increase month at a time from the current age of 55 to 57, with people currently in their late 40s eligible to draw pensions at different ages based on their date of birth. As Cameron says, “this avoids a ‘cliff-edge’, but would be complex to communicate.”.
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.
Lighthouse Financial are specialists in range of pension products and can you identify the right pension for your financial situation. Call us today on 01697 325852 to find out more.
Read less
