Age for savers to access pension could rise from 55 to 57
Pension savers will need to prepare for a two-year increase in the age at which they can access their retirement pot.
The pension freedoms introduced in April 2015 allow people to access their defined contribution (DC) pension from the age of 55, subject to their marginal rate of income tax.
The age will increase to 57 on April 6 2028, according to plans set out by the Treasury.
A consultation document said: “The Government believes that increasing the minimum pension age reflects increases in longevity and changing expectations of how long people will remain in work and in retirement.”
The document said the Government recognises the special position of members of the armed forces, police and fire services – and where scheme members do not already have a protected pension age it proposes not to apply the proposed age increase to people in those schemes.
The consultation will run until April 22.
Tom Selby, senior analyst at AJ Bell, said: “The rise in the normal minimum pension age from 55 to 57, which has been long trailed by the Government, is designed to reflect rising life expectancy, and will maintain a 10-year gap between the point someone can access their private pension and the state pension age.
“Some people who have rights to access their pension before age 57 in their existing scheme will be able to retain their lower minimum pension age, with the practicalities of these measures subject to consultation.
“While this may come as a blow to some people, it is important to remember that just because you can access your pension doesn’t mean you should.
“It’s worth bearing in mind that someone in their mid-50s might have another 35 years or more to live.”
Sir Steve Webb, who was pensions minister when the freedoms were introduced, said: “Whilst the increase in the normal minimum pension age from 55 to 57 had been widely trailed, the way in which the change will be implemented could be complex for savers and for schemes, and risks creating ‘second class’ pensions with tougher access rules depending on when they were opened.
“There will be a need for clear communication with members to make sure they understand the different rules which may apply to their different pensions.”
Sir Steve, who is a partner at LCP (Lane Clark & Peacock) added: “As we move towards an era of pension consolidation, members will have to be careful not to accidentally throw away protected rights to access a pension at 55.”
