The minimum pension age will rise to 57 in 2028 – what does it all mean?

22 July 2021

7 in 10 adults don’t know that the government intends to increase the minimum pension age from 55 to 57. If you’re one of these people, read on to find out how this change could affect you.

The normal minimum age you can currently access your pension is 55 but, in April 2028, this age will increase to 57. Although the details of how the transition will work in practice are still being finalised, being aware of the change early may help you avoid potential pension pitfalls.

Research from Aegon found that adults have a good understanding of the current normal minimum pension age. Specifically:

• 83% of adults are aware of the minimum age you can access your pension
• 64% knew that the minimum age was currently 55.

However, only 68% said they knew that the minimum pension age was increasing. And, worryingly, 83% of 18 to 34-year-olds were entirely unaware of the change.

Due to take effect from 6 April 2028, the change in minimum retirement age will affect all workers aged 48 and under.

Recent proposals from HM Treasury set out how they would implement the increase

Under the most recent proposals, adult workers already in a scheme with an “unqualified right” to take pension benefits from age 55 will be allowed to keep this. However, people joining a new scheme after 11 February 2021 won’t be able to access benefits until age 57.

Adding further complication, individuals who transfer from an existing scheme to a new scheme will also lose the right to access benefits before age 57. This may be avoided if it’s a block transfer, where two or more members of the same scheme transfer at the same time.

Unsurprisingly, this is likely to put you off moving your pension to a different scheme, even if the change offers better value for money.

44% of people would be reluctant to transfer their pension

Research confirms an increased reluctance to transfer. 44% of people aged 35 to 54 (the first in line to be affected by the minimum age change) would be put off the idea of transferring their pension to a better scheme if doing so lost them the right to take benefits from age 55.

However, sometimes transferring your pension to a new scheme can result in lower charges, as well as improved investment options, which can make a big difference to your retirement income.

Making sure you have enough pension savings

As life expectancy increases, pensions will need to support people for longer.

Research repeatedly shows that we worry we won’t have enough to provide a comfortable retirement. A study from Aviva found that 58% of UK adults between the ages of 45 and 60 worry that they won’t be able to afford to retire comfortably.

Therefore, it makes sense that the main reason the government is introducing this change is to help make sure people have enough pension savings to provide an adequate income throughout their retirement.

“As people on average are living longer, this has merit, but people need to know about the change well in advance,” says Aegon’s Pensions Director, Steven Cameron.

“Although the number of people who access their pension at age 55 is relatively small, any increase to the minimum age must be communicated widely and well in advance of April 2028, so that people who are planning ahead aren’t left disappointed,” Cameron added.

But the proposals on how to introduce the increased minimum access age bring with it complications and challenges which you should not ignore.

In the UK, the average retirement age is around 65. So, it’s possible that the increased minimum age may not affect you.

What it means for you

The increase to the minimum age will be introduced on 6 April 2028, with no phasing of its introduction. This means:

• If you were born before 6 April 1971, you’ll continue to be able to access your pension at age 55
• If you were born after 5 April 1973, the earliest date you can access your pension benefits will be delayed by two years
• If you were born between 5 April 1971 and 5 April 1973, you have a window of opportunity from your 55th birthday to 6 April 2028 to take benefits from your pension before the minimum pension age increases to 57. If you don’t access your pension during this period, you’ll have to wait until your 57th birthday.

If you had no plans to retire before 57, the change will make little difference to you. However, it’s worth remembering that it’s important to avoid dipping into your pension pot just because you can.

This is Money reported that nearly a quarter (24%) of over-55s had dipped into their pension savings even while they were still making regular contributions. Withdrawing sizeable sums from your pension without considering the consequences could mean you jeopardise your ability to afford a comfortable retirement when you stop work.

Drawing from your pension while still making contributions also sees the Money Purchase Annual Allowance kick in, which restricts the amount you can save tax-efficiently into your pension to just £4,000 per tax year.

Should you be fortunate to have enough pension savings to retire at 55, from 2028 you’ll have to work for an additional two years before you can start drawing an income from your pension.

The upside to working longer is that you’ll have an extra two years of pension contributions. This means a potentially bigger pension fund to pay for a comfortable retirement, and that the fund will have to sustain you for two fewer years.

Get in touch

If you want to discuss how the increased minimum pension age might affect your retirement plans, or if you’d like to discuss your pension savings, please get in touch. Email info@depledgeswm.com or call 0161 8080200.

Please note

A pension is a long-term investment not normally accessible until 55 (57 from 2028). The value of your investment (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.