In the past the previous chancellor, George Osborne, stated that the plan was for the earliest age that you could draw your benefits from your personal pension would be 10 years lower than the State pension age at that point in time.
However, the only legislation that is in force currently is to say that the minimum age for taking personal pension benefits is 55 and no further increases to the personal pension retirement ages have actually been set in stone.
But, that is not to say that this will not happen some time in the near future to keep personal pension retirement ages in line with those of the state pension (minus 10 years). In fact the Treasury has confirmed that it will push ahead with the changes to personal pension retirement ages and add them in to future legislation to keep them in line with state pension ages.
What this means in practice is that anyone who was born in 1971 may have the minimum age at which they can take their personal pension changed to 57. This is because the first date at which the State pension age changes to 67 is in 2028 and at that time, if they changed the personal pension age to 57, that would be for people who were born in 1971. So if you were born before 1971 then hopefully none of the changes will affect you.
So there is a group of people, if that is the case, whose state pension age is 67 but who may still be able to take their personal pension at age 55. These are the people who are born between 1961 and 1971.
However, as we say, all this is hypothetical until more legislation is enacted!
In March 2016 John Cridland CBE started a review of state pension ages for those people who would be retiring after April 2028. The review was required by the 2014 Pensions Act which said that state pension ages would be reviewed in each parliament session and this one was the first. As state pension ages for those retiring before 2028 are already set in law, there was no scope for any changes for those people.
Anyone whose retirement age falls before April 2028 will not be affected by any changes that may be proposed in this review, but those retiring after that date may see an increase in their retirement age.
In October 2016 Mr Cridland released an interim review document which called for the views of public and representative bodies so that they can have their input into the future of the state pension and how and when it is paid. The consultation period lasts until the end of December 2016.
The interim review is set to be forward looking in terms of the situation of future retirees, the change in demographics predicted in the future and in particular whether state pension age should be more flexible rather than at a fixed date for each person.
Those who are part of Generation X are most likely to be affected by the review of state pension ages.
The review separated people into 3 generations – Baby Boomers (born 1945-65), Generation X (born 1966-1979) and Generation Y (born 1980-2000). It is most likely that those who fall into the Generation X category will be more likely to be affected by this review as they will be the ones whose retirement age falls first in terms of those affected, and those who have the shortest amount of time to make any changes that they may need to with regard to retirement planning.
The terms of reference of the review meant that it needed to consider the three key pillars of Affordability, Fairness and Fuller Working Lives.
In terms of affordability, simply looked at, the state pension is paid for by the people who are working at that time and so the relationship between the number of working people to the number of retired people needs to be taken into account to assess the affordability (amongst other factors).
Fairness is in reference to the fairness of the amount of state pension paid to different generations, i.e. perhaps some people will consider that they are receiving less pension than their parents or grandparents, having paid in the same amount.
In taking into account fuller working lives, this should enable people to work longer, as the level of health and fitness of people increases compared to older generations at the same age.
Another key factor that we have posted about before is the fact that life expectancy is increasing which obviously means that if pensions were paid from the same date that they would need to be paid for longer and this would be more expensive. Part of the governments proposals on state pension ages was that it was expected that people would spend around a third of their working lives in retirement and obviously if life expectancy increases, this is likely to increase retirement ages when you take that into account.
The review is also looking in particular at those who may be most impacted – carers, the self-employed and people with disabilities who may find it hard to build up their own private pension and emphasis was put on getting feedback from those groups of people.
The review will conclude by May 2017 and it could be expected that we may see some more changes in retirement ages set out in legislation after that.
