New pension freedoms introduced six years ago, allowing savers greater control over their nest egg from age 55, have proved a great success.
Since 2015, the total value of flexible withdrawals from pensions has exceeded £45 billion.
Now, though, the Government has announced its intention to raise the normal minimum pension age to 57 from April 2028.
Some think it harsh that people will have to wait longer to get their hands on their own money.
Others are unhappy with the manner in which the proposal – a consultation period has now closed – is scheduled to be introduced, with LCP partner and former Pensions Minister, Steve Webb, warning that it risked creating “second class” pension schemes.
He told Pensionsage: ““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. 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.”
Hymans Robertson partner, Michael Ambery, added: “Individual pension savers could be put off by changes that on the face of things may just sound like you need to work for longer and money is locked away. In the current environment saving for retirement and what that looks like may mean this may feel unpopular.
“A change to the earliest point at which an individual can claim pension benefits and the payment of benefits such as state pension and other pensions becomes a juggling act where an individual will need help and support in order to determine the best approach and timing of taking benefits.”
The Government says they are simply seeking to maintain the 10-year gap between the age at which people can access their state and private pensions.
It stated: “Increasing the normal minimum pension age reflects increases in longevity and changing expectations of how long we will remain in work and in retirement. Raising the normal minimum pension age to age 57 could encourage individuals to save longer for their retirement, and so help ensure that individuals will have financial security in later life.”
Those born before 6 April 1971 will continue to be able to access their pension at age 55. Those born after 5 April 1973 will have the earliest date they can access their pension benefits delayed by two years. Those born between 5 April 1971 and 5 April 1973 will have a window from their 55th birthday to 6 April 2028 to take benefits before the minimum pension age increases. If they don’t access their pension during this time, they will need to wait until their 57th birthday.
The biggest anomaly is over proposed protections.
Standard Life notes: “It’s intended that there will be some protection to allow benefits to continue be taken from age 55.
“However, this appears to be causing some confusion with many believing that because they currently can access benefits at age 55, this gives them a protected pension age. Ultimately, the scheme rules will determine whether protection is available. Protected pension ages are likely to be the exception rather than the norm.”
Due to their special circumstances, members of the police, firefighters and the armed services will not have the age increase applied to their schemes.
Getting advice on how this affects you is going to be vital if you are not to lose out.