Personal Pension Retirement Age Increases

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!

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Is Personal Pension Retirement Age Linked to State Pension Age?

So if you are wondering if personal pension retirement age is linked to State Pension Age then the short answer is possibly! In the past it was possible to take your personal pension at age 50 but this was in the days when the State Pension Age for women was 60 and for men was 65.

The retirement age for personal pensions was then increased to 55 in April 2010. At that time, and since, the government has said that it wants a correlation between the retirement age for personal pensions and the State Pension Age. Currently the policy is for the difference to be 10 years. This therefore begs the question as to is that 10 year age gap going to continue? The idea is that it will continue, and if anything it may get smaller, possibly even a gap of 5 years. However, there is no actual legislation in place to make this change so at the moment it is still really speculation.

So with State Pension Age increasing over the coming years, can we expect that the minimum age for taking your personal pension will increase above 55 soon? Even those within 10 years of thinking they may be able to have access to their personal pension, may have to wait a few years longer. For example if you are 48 now, you may expect that in 7 years time you can access your personal pension funds, whereas, because your State Pension age will be 67, it is quite feasible that you may not be able to access your personal pension until age 57.

There has been talk, as mentioned, that the difference between the private pension retirement age and State Pension Age will be reduced to 5 years in future, this means that people will have to wait even longer to be able to access their pension pots and for a lot of people this could be as late as age 65 if the State Pension Age is increased to 70 in the future as expected.

So at the moment it is a little bit up in the air, but it might be worth having contingency plans in place just in case you can’t get access to your personal pension as soon as you might think.

 

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What is the Retirement Age for Personal Pensions?

When you set up your personal pension then you would have chosen a retirement age for yourself which quite possibly would have been 60 or 65. However, that is not to say that you can’t take your personal pension benefits earlier than this. The minimum age for withdrawing benefits from a personal pension is 55 (it used to be 50 but this has now increased so you can’t take them any earlier than 55).

If you do wish to take your personal pension benefits early then you need to check with your pension provider that there are not any penalties for withdrawing the benefits early. Often there are not but it is definitely worth checking. Also if you are thinking about taking benefits early then it is worth looking into it a few years beforehand to check where your funds are invested and whether you should be switching investments to something more short term if you originally invested on a long term basis. Obviously you should consult with a financial adviser about this kind of thing. For example if all of your funds are invested in shares and there is a sudden drop in the market just before you want to retire then you may lose some money. It is possible to invest in safer funds a few years before so that this doesn’t happen to you.

If anyone tells you that you can take your pension before age 55 then you should definitely take advice on this from elsewhere as, if you do this, you may be subject to a big tax charge for illegally withdrawing your benefits early. It may be possible to take them in exceptional circumstances (for example extreme ill health) but in normal circumstances you can only take the funds after you reach age 55.

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