The government published draft legislation to raise the minimum age for drawing pension benefits from age 55 to age 57. This proposed increase was originally announced in 2014, but draft legislation is now putting this change in place as part of the 2021/22 Finance Bill.
What will this change mean?
At present, the normal minimum pension age (NMPA) at which you can draw benefits from a pension scheme is 55. This should not be confused with the age when you become entitled to a State Pension, which is currently age 66.
From 6 April 2028, the NMPA will increase to age 57, by which time the State Pension Age will have risen to 67. There will be no phasing, so essentially the change takes effect overnight. However, the NMPA will remain at 55 for members of “uniform services” (i.e. armed forces, police and fire services).
Any transitional provisions for pension benefits for the change from age 50 to age 55 will remain in place. A new set of transitional provisions will allow access to retirement savings before age 57 if, on 11 February 2021, your pension scheme rules gave you an unqualified right to draw benefits before age 57. To qualify, you must have joined the scheme by 3 November 2021.
How does this change impact retirement planning?
If you are planning to retire at the earliest opportunity, at age 55 or age 57, you need to ensure that you have sufficient savings to provide income throughout your retirement. For example, a pension fund equal to the current lifetime allowance (£1,073,100) at age 55 would only currently produce around £18,000 of guaranteed inflation-proofed income.
Our advisers can help you to plan ahead so that you are able to retire when you want and that your plan reflects the changes in the NMPA and also the State Pension age. You may be looking to take some pension benefits at the earliest opportunity as part of a phased retirement, but you need to ensure that any transitional provisions meet the requirements.
We can review your existing savings and undertake cashflow modelling to give you a clear view on how much income you can expect in retirement and actions you need to take to reach your financial objectives.
At retirement, our advice can then discuss the retirement options available and recommend the most suitable option for your financial objectives.
For many clients, the journey to retirement starts at the start of their career and our regular reviews can then provide comfort or recommendations to keep on track.
The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is intended to be for information only and should not be taken as financial advice.
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