The government has confirmed its intention to increase the normal minimum pension age from 55 to 57, with effect from 6 April 2028. The timing of this change coincides with the change in state pension age to 67, which will happen on the same date. How does this affect your financial plan? Is there any action you need to take? In this article, our financial planning team here at Vesta Wealth offers some reflections and information for our clients and readers across the North of England.
What is changing?
From 6 April 2028, the minimum pension age will rise from 55 to 57, which will affect all registered pension schemes, except for the uniformed services pension schemes, including the various firefighters, police and armed forces public service pension schemes.
Why is the minimum pension age changing?
We are encouraged to save for our retirement through a range of tax incentives such as tax relief on contributions, tax advantaged growth on the pension fund and the availability of a tax-free lump sum from a portion of your pension savings on retirement. There are also laws which require employers to automatically enrol their staff into a qualifying workplace pension scheme, into which they must contribute. Together these measures mean that most people will have retirement savings which, together with the state pension, should ensure that they have sufficient money to live without relying on means tested benefits in old age.
The minimum pension age was last increased in 2011, when it changed from 50 to 55. Since then, it has been argued that the minimum pension age should rise again, so that it reflects improvements in longevity.
The minimum pension age recognises that some may be able to retire earlier than their state pension age, but not so early that the incentives go to people who did not necessarily need them.
Is there anything I can do about this, to retire earlier?
Firstly, remember that pensions can be accessed from any age if you are in ill health and can no longer work.
If you are not in ill health and intend to retire between 55 and 57, you may be able to benefit from the transitional arrangements which will allow some pension schemes to retain their normal minimum pension age of 55 for existing members and those joining before 6 April 2023, depending on the rules for that particular pension scheme which were in force on 11 February 2021.
Whether this applies to you will depend on the specific pension scheme in question and this is something you should discuss with your Financial Planner.
Bear in mind that the legislation itself is currently only in draft form and may be changed before it becomes law.
Can I afford to retire early?
This is a common question put to our Financial Planners, and the answer will very much depend on a range of considerations including your age, life expectancy, amount of income required and the value of your existing savings. In general, the longer you leave retirement, the more money you should have in retirement. For this reason, few actually access their benefits as early as age 55, but if this is something you are considering then please discuss this with your Financial Planner.
Will there be further increases in the minimum pension age?
When reviewing state pensions in 2014, the government announced its intention to change the minimum pension age to 57 from 2028. Once this change has been made, the minimum pension age will be exactly 10 years lower than state pension age, and although there is no explicit link between these, it is thought that the government may seek to link them for any future increases.
Invitation
If you would like to discuss your financial plan and retirement strategy, then we would love to hear from you. Get in touch with your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.
Reach us via:
t: 01228 210 137
This content is for information purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.