Over recent years, the government have gradually been increasing the age at which you can take your State Pension. The age will have risen to 66 for everyone by this month, and then will rise to 67 between 2026 and 2028. There are then plans to increase it to 68 in the 2040s.
Last month, the government also announced that they planned to increase the age you can access your pension from 55 to 57. Here’s what you should know about the announcement and how it could affect you.
What is changing?
In 2014, the government announced plans to increase the age you can access your pension from 55 to 57. They have now confirmed these plans, and the new age will come into effect in 2028.
Although the age at which you can access your pension has increased, the government have not announced any other changes to Pension Freedoms. So, at present, how you can access your pension fund once you reach the age of 57 remains the same.
As yet, there has been no formal announcement as to exactly when and how the changes will take effect. It could be on a specific date, such as the start of the new tax year on 6th April 2028, or in October 2028 when the State Pension age rises to 67 years.
Alternatively, the government could take a phased approach to implement the cut-off age. This would involve raising the minimum age gradually, with people eligible to draw pensions from different ages based on their exact date of birth. This approach would be similar to how the women’s pension age began increasing from 60 to 65 a decade ago.
Why is it changing?
The decision to increase the age at which you can access your pension is designed to keep the retirement age in line with the State Pension age, which will increase to 67 in 2028.
The aim is to maintain a relatively small gap of ten years between the two, effectively lowering the risk of you drawing down your private pensions too quickly and running out of money before you have access to your State Pension.
Increasing the age limit also helps keep the retirement age in line with increased life expectancy. The original State Pension age of 65 was introduced when, according to Office for National Statistics, life expectancy was 74 for men and 79 for women. On average, pensions had to last under a decade for men and just 14 years for women.
Average life expectancy has now risen to age 79 and 84 respectively. Increasing the age limit in line with this growth makes it more likely that you will have enough money to live on for the remainder of your retirement.
And, because life expectancy is predicted to continue to increase, this could be the first of many retirement age increases.
What does the increase mean for you?
If you were born before January 1st, 1973 you will be affected by this age increase, and you will have to wait two years longer to access your pension.
You are in a slightly uncertain position if you will be aged between 55 and 57 in 2028. This is because we don’t yet know how the cut-off will work in practice. Expect further announcements when the government publishes more details of the transition.
The situation is much clearer if you are decades away from retirement as you will now need to plan for accessing your pensions at 57. With plenty of notice of the upcoming changes, you should have enough time to adjust your plans and account for a later retirement age.
How could this age increase affect your retirement plans?
Reviewing your plans can ensure that you’ll have enough money to achieve your desired lifestyle in retirement. So, take this opportunity to review your provision and consider how the increased age limit could affect your savings.
The biggest benefit of this increased age limit is the extra time it gives you to save money, increasing the size of your pension fund. Working for an additional two years also means your savings will have to last you two years less, further increasing what you can spend each year.
Of course, saving for two more years means working for those additional years!
Fortunately, this is not something that will affect most people as retiring at 55, or even 57, isn’t all that common. According to the Department for Work and Pensions people, on average, retire when they’re 65 years old. So, unless you already have substantial private savings set aside for an early retirement, the new age limit is unlikely to harm your plans.
Get in touch
If you want to review your retirement plans in light of this proposed change, or you’d like to find out more about how you will be affected by the pension age rising to 57, please get in touch. Email firstname.lastname@example.org or call (0161) 8080200.
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.