UK raises private pensions access age to 57

UK raises private pensions access age to 57

The British government has announced plans to raise the age at which pension pots can be accessed from 55 to 57.

The change would mean that millions of Britons in in their 40s will have to wait until 2028 at the earliest until they can access their private pension.

Britain relaxed pension rules in 2015, since when many have taken advantage of so-called pension freedoms to access their savings early. However several commentators welcomed today's announcements, pointing out the reform will give workers longer to build up their savings.

Part of the trade-off for receiving pension tax relief and the perk of tax free cash is that savers have to commit to keep their money locked up till their mid-50s."

Carla Morris, financial planner at wealth manager Brewin Dolphin, said: "The government has confirmed that from 2028 anyone wishing to take advantage of pension freedoms will have to wait until they are 57 before being able to access their pension, rather than at age 55.  It is good to have this clarified so that people can start to plan ahead.

"Anyone under the age of 47 at the moment will be impacted and it is really important that this is communicated well so that we don't see people expecting to be able to retire and access their money, not being able to. 

"While this may be annoying for some pension savers, it does mean that you can spend the extra two years building up your investments and savings to provide even more funds to enjoy in your retirement."

"With life expectancy continuing to rise a pension pot will have to last a lot longer than it once did, around 30 years as life expectancy is currently 83 and for a woman 85."

She added: "For those whose mortgages need to be repaid, and were relying on the tax free cash element of their pension, you should start talking to your mortgage lender as soon as possible.  There are options available such as extending the term of the mortgage or loan."

"Now is the time to review your pension and if there is an automatic move into lifestyle funds at the age of 55, then you need to consider changing some of this or you could lose out on some investment gains.  If you don't feel confident in this, then seeking advice would be a good option as good advice can pay off."

Quilter head of retirement policy, Jon Greer, said: "This will be a blow to some savers that had hoped to retire at 55. A few diligent pension savers are lucky enough to be able to afford to retire at 55 with a pension pot sufficient to last the rest of their lifetime. But in future that age will switch to 57 before savers can unlock their tax free cash and income from a retirement fund."

"Designed as a safety valve in the pension system, the minimum age for accessing a pension is intended to prohibit people from withdrawing too much of their pension too soon. Part of the trade-off for receiving pension tax relief and the perk of tax free cash is that savers have to commit to keep their money locked up till their mid-50s."

"If you want to retire before the age of 57, the first thing to do is think very carefully about whether that is really financially viable and speak to a financial adviser. Given future increase in state pension age it means you will likely have over a decade drawing on your own savings before any state support kicks in. Many people underestimate their longevity as it is and risk running out of money so selecting an early retirement date needs to be planned carefully."

John Glen, economic secretary to the Treasury, said: "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."

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Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.