From 2028, you won’t be able to access your Personal Pension until the age of 57. The government’s decision could affect your retirement plans and it’s important to review what it means for your future.
The government previously stated it intended to increase the age people could access their Personal Pensions, currently set at 55. However, it didn’t put legislation in place, leading to speculation that the change wouldn’t go ahead. The government has now confirmed that it will legislate for the rise ‘in due course’. So, if you turn 55 in 2028 or after, you’ll have to wait an extra two years before you can access your retirement savings.
Why is the pension age rising?
The rise in Personal Pension age follows similar plans to increase the State Pension age. As people are living longer, pensions are being stretched to last for several decades. The move is part of this trend, helping people to ensure their pension savings are there to provide an income in later life.
When Pension Freedoms were first introduced in 2015, providing pension savers with more freedom, there were concerns that some would recklessly spend too much too soon and leave themselves financially vulnerable in later retirement. However, figures suggest this hasn’t been the case. The majority are taking a sustainable income.
So, is a further rise on the cards? We can’t predict what will happen. But it’s likely the age you can access your Personal Pension will rise again in the future, perhaps in line with the State Pension age. Keeping up to date with pension changes and what they mean for you is essential, this is an area we can help you with.
How does the change affect your retirement plans?
Whether the change to Personal Pension age will affect you will depend on what your plans are.
- I don’t plan to access my pension before the age of 57
If you had no plans to access your pension before the age of 57, the recent announcement doesn’t affect you. Your retirement plans should be able to go ahead. However, it’s still important to regularly review your long-term financial plans and keep in mind that further changes could be announced in the future.
- I want to retire after 57 but intended to access a portion of my pension
The Pension Freedoms meant retirement savings could be accessed how and when you liked from the age of 55.
One attractive option was the ability to take a tax-free lump sum up to the value of 25% from your pension. It’s an option many have taken advantage of before they’ve retired. Alternatively, you may want to access your pension to supplement your income before you retire.
If you had intended to start making withdrawals from your pension at 55 while still working, you’ll now need to adjust your plans. The simplest option is to push your plan back by two years to reflect the recent changes. However, if you don’t want to do this, you should assess how your other assets can bridge the gap. You may be able to use savings and investments, for instance, to provide the income you want for the two years before your pension is accessible.
Make sure you understand how using other assets could affect your wider plans and where to make withdrawals from. For example, there’s a subscription limit for ISA accounts so it may make sense to use other assets first. Please get in touch to discuss how your assets could be used in place of your pension.
- I plan to retire and access my pension at 55
If you plan to retire at 55 after 2028 and don’t want to delay plans, you need to create a new plan for building an income now. The sooner you tackle this, the better the position you’ll be in to still reach your retirement goals.
In some cases, it may be necessary to make adjustments. For instance, you may need to delay plans or cut back on your planned outgoings. While this can be frustrating after looking forward to retirement, it can help preserve your wealth to create a stable income for retirement, which could last decades.
However, you may find you’re in a better position and can still proceed with plans.
Exploring your options and assessing other assets may provide alternative ways to create the reliable income you need for the first couple of years of retirement until you can access your pension.
It’s crucial that you look at the long-term impact of using other assets. For instance, if you’d intended to use them to supplement your pension throughout retirement, how will taking a larger sum in early retirement have an impact? Or will it mean your legacy is reduced?
If your retirement plans have been affected by the changes, please get in touch. We’re here to help you understand how other assets could be used and what it means for your plans. We’ll use a range of tools to demonstrate how your wealth can be used and will be affected over the long term by funding retirement, giving you the confidence you need to make decisions.
Reflecting legislative changes in your retirement plans
Keeping up to date with government changes and how they affect your retirement plans, can be challenging. Understanding how changes will have an impact on your retirement goals, even more so. Working with a financial planner can help you see whether changes present opportunities or a need to adjust your plans. Please get in touch to discuss your retirement plans, pensions and what legislative changes means for you.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.
Jon Doyle is Founder and Financial Planner at Juniper Wealth Management. Advising clients since 2008 he has guided clients through good time, bad times and the ugly. With a clear vision on how advice should be delivered and strong opinions on how we should be investing money in order to live the life we want to live free from money worry.