The government has confirmed that the age at which individuals can access their private pension will increase from 55 to 57 in 2028.
It had previously indicated its intention to do this in 2014 but provided confirmation of its plans in an answer to a parliamentary written question on 3 September.
Work and Pensions Committee chair and Labour MP for East Ham, Stephen Timms, asked the Treasury what its plans were in relation to increasing the minimum age at which people can access their private pension under the tax rules. In response, Economic Secretary to the Treasury, John Glen, confirmed the government still planned to make the 2028 change.
“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,” he stated.
As yet, it remains unclear how and when the increase will be introduced. This could be phased in gradually, just as with the State Pension age increase. Alternatively, the increase could apply from a fixed date during 2028, whether 6 April (the start of the tax year) or perhaps in October, to coincide with the State Pension age increase to 67. We shall have to wait for further details but clearly, this will have consequences for those individuals currently aged 47 and under.
Currently, from age 55, those with pensions have the option to extract up to a maximum of a quarter of the value of their fund tax-free, whether in one go or staggered over a longer period. Thereafter, you have the option to arrange a regulated taxable income from an annuity for example or for those who wish to retain a little more flexibility, drawdown is another option. This allows the pension to remain invested and for you to make taxable withdrawals directly from the fund. This can remain for as long as you wish and potentially up to death, when your beneficiaries may inherit any remaining pension fund.
Another option is to defer the drawing of pension benefits altogether and in light of the tax attractions, if affordable, this remains one of the most appealing options of all.
In light of the many options and the potentially awful consequences of making the wrong decision, we encourage you to seek professional financial advice.
