The Government has confirmed that the age at which people can access money from their private pensions will rise from 55 to 57, in 2028.
On Thursday 3rd September, Stephen Timms – Labour MP for East Ham – put a written question to the Treasury asking what plans they have “….to increase the minimum age at which people can access their private pension under the tax rules….” The Government had previously proposed the increase back in 2014 - to all pension schemes aside from those in the public sector that link their normal pension age to the state pension age - but as no legislation was introduced at the time, there was uncertainty as to whether the change was still planned.
John Glen – Conservative MOP for Salisbury – confirmed the Government still planned to make the change in 2028, replying as follows:
“In 2014 the government announced it would increase the minimum pension age to 57 from 2028, reflecting trends in longevity and encouraging individuals to remain in work, while also helping to ensure pension savings provide for later life.
That announcement set out the timetable for this change well in advance to enable people to make financial plans and will be legislated for in due course.”
Whilst the change has still not been brought into law, Thursday’s announcement confirms that there are still plans for the legislation to go ahead. Steven Cameron - Pensions Director with Aegon - stated “The government did indicate back in 2014 its intention to do this, but didn’t include provisions in legislation, leading to uncertainty over whether the change was still planned.”
Presently, savers who have a personal pension, either privately or through their employer, can access their money at 55. Accessing before this time can be done but the tax penalties can be as much as 55%. The increase in pension freedom age to 57 is designed to keep it ten years below the state pension age, which increases to age 67 by 2028. This means that anyone currently 47 or under will have to wait an extra two years before they access their pension savings from previous jobs.
Commenting on the confirmation, Steven Cameron said that it would be “particularly impactful” for those who turn 55 years old just after the cut-off point. He added:
“It is now imperative that both government and industry make sure this change is clear to all those saving in pensions.”
He continued:
“We cannot afford a repeat of the government communication gaps which left many women to find out too late that their state pension age was increasing from 60 to 65.”
Helen Morrissey, Pensions Specialist at Royal London agreed with the sentiment, stating:
"While raising the age by which people can access their private pension may seem sensible the government needs to learn the lessons from the WASPI women and make sure people are given adequate notice and information to prepare for any change."
Additionally, the age at which the state pension applies is rising and will increase between 2044 and 2046 to 68 years. As the private pension access age was designed to fall ten years before state pension age, there is a distinct possibility that further increases could be brought in.
