New Pension Rules coming in
Age may just be a number but check your retirement plans, they might have to change as new pension rules are introduced
The pension freedoms introduced in 2015 changed the retirement plans of a generation. It gave savers the right to take money out of previously locked-up private pensions at aged 55.
This added a flexibility to pension planning unheard of previously, as people were effectively given a wide range of options for the retirement savings. But things are changing and anyone born after 5 April 1973 wont be given the choice of taking their pension money at aged 55. The government is increasing the age at which people can take their pension benefits by two years. This means from April 2028 the age at which you can access your retirement cash will climb to 57.
Adam Young, Jarrovian Director and Head of Private Office, comments: The change could throw into disarray the plans of anyone whos been banking on accessing their cash when they reach 55. It means they will need to have another look at their options and make changes if necessary.
There will be no phased introduction of the raise in age. It means that anyone born before 6 April 1971 will continue to be able to access their pension at age 55, but those born after 5 April 1973 will have the earliest date that they can access their pension benefits delayed by two years.
Young adds: However anyone born between 5 April 1971 and 5 April 1973 will have a choice. They have a window which starts at their 55th birthday and lasts until 6 April 2028 where they will be able to take benefits from their pension pot before the minimum pension age increases to 57. If they don't access their pension during this time, they will have to wait until their 57th birthday.
The potential confusion doesnt just extend to peoples age and eligibility to take pension benefits at 55, but also to those who believe that because they currently can access benefits at age 55, this gives them a protected pension age.
Young comments: Thats not necessarily the case, it will depend on the rules of their pension scheme. Most personal pension-based schemes simply define the earliest retirement age as the normal minimum pension age. So, the date at which youll be able to access your benefits will increase in line with the normal minimum pension age.
It means it is important for people to find out if their pension age is protected under their existing arrangement. In a further complication anyone with a protected pension age could face problems if they transfer their fund to a new provider.
Young says: Doing nothing now could prove problematic later. Get in touch with your adviser to find out what your situation is and how your plans may need to be changed. Thats especially true if youve been planning to retire at age 55.
About Jarrovian Wealth
JW was established in 2017. Our team of skilled and experienced financial planners does more than just look after the numbers for clients around pensions, investments and protection – both personal and business. We get to know and understand the deeper motivations and aspirations, so we can challenge people to think bigger. While knowing they are in a safe pair of hands building up a secure financial future. We may be one of the newer players, but we are packed with experience as our clients have been trusting our experts with their financial lives for over 30 years. We don't just focus on individuals we incubate businesses too helping entrepreneurs and those up and running to get ventures off the ground, stay on track and plan the perfect exit strategy, so owners can focus on the day job of running the show. JW's headquarters are in London.
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PAUL SMITH ASSOCIATES
15th April 2021