How will changes to the pension age impact me?
I am 45 years old and currently have a SIPP worth around £130,000. Will I be able to access this at age 55 or will I have to wait until I’m 57?
Tom Selby, AJ Bell Senior Analyst says:
Under current UK retirement rules, usually people can access their pension from age 55.
When the pension freedoms rules were first announced back in 2014, the Government said this age – the ‘normal minimum pension age’ – would rise to 57 from 2028, alongside the increase in the state pension age to 67.
At the time, ‘the Government said this was in order to reflect trends in longevity and to encourage individuals to remain in work and to build sufficient savings for retirement’.
In the future the intention is for the normal minimum pension age to remain ten years below the state pension age.
WORKING THROUGH THE DETAILS
The Government is now working through details of how the increase in the normal minimum pension age to 57, scheduled for 6 April 2028, will be applied.
It has confirmed people in the armed forces, firefighters and police will be exempt from the rise and so will still be able to access their pension from an earlier age.
People in schemes which contain specific provisions allowing them to access their pension before age 57 will also be able to retain their lower normal minimum pension age. This protection is expected to cover both existing and future benefits in the scheme.
However, for pensions without such provisions and new pensions set up from 12 February 2021 the scheduled increase in the normal minimum pension age to 57 is expected to apply.
In your case, assuming your current scheme doesn’t give you ‘the right’ to take your benefits from age 55, then it is likely the first point you will be able to access your SIPP will be age 57 (although it’s important to note these proposals are subject to consultation).
While this increase in the normal minimum pension age may come as a blow to some people, it is important to remember that just because you can access your pension doesn’t mean you should. It’s worth bearing in mind that someone in their mid-50s might have another 35 years or more to live.
Anyone accessing their fund this early therefore needs to think carefully about the sustainability of any withdrawals and the impact they might have on their lifestyle as they grow older.
Finally, if you have a defined benefit (DB) pension the age at which you can take an income will be determined by the ‘normal pension age’ in your scheme rules. You may, if the scheme rules allow, also be able to access your pension earlier than this at a reduced rate.
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Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.