It would be hard to have any interest in retirement planning and not have heard of Pension Freedoms, the reforms introduced in 2015 which revolutionised the pensions landscape.
However, amid the excitement created by the new legislation, a small, yet hugely significant change went almost unnoticed. And, depending on when you want to retire, your current age might hold you back.
The age at which you can access your pension funds through Pension Freedoms is currently 55.
However, in future the earliest you can access your private pension arrangements will be set at 10 years before your State Pension age. That will potentially affect millions of people, forcing them to work longer and delay their retirement. Or at least when they access their pension.
When will you be able to access your pensions?
It depends when you were born.
The State Pension Age is increasing in line with the average life expectancy and health of the general public.
In 2017, the State Pension Age for women has already been increased to bring it into line with men at 65, and both will increase:
- To 66 between 2019 and 2020
- To 67 between 2026 and 2028
As we said, the age at which you will be able to access your pension fund will be 10 years prior to your State Pension age, therefore, if one rises, so will the other. So, from 2028 the earliest someone will be able to access their private pension will be 57.
Unfortunately, research by Old Mutual Wealth has shown that 53% of 50-75-year-olds are unsure about what the Pension Freedoms reform means for them, while 15% were unaware of the reforms at all.
That means some people could be hoping to take their pension benefits at age 55, yet remain blissfully unaware that the new rules will prevent them from doing so.
Why does the age rise matter?
Simply because if you were planning to retire after 2028 by accessing your pension you will have to change your plans.
Essentially you have two options:
- Choose to delay your retirement until you can access your pension
- Press ahead with retiring at 55 and use alternative sources of income, perhaps investments or savings to bridge the gap between finish work and being able to access your pensions
Of course, there’s a third option.
You may not have planned to retire early, in which case the new rules don’t affect you. However, if you want to finish work in your mid 50s and plan to retire after 2028 you have some thinking to do, and potentially changes to your planning to make.
That’s where financial planning comes in.
Understanding what you want out of retirement, and when, then analysing your existing provision and building a plan to help you achieve your goals is exactly what we do.
There’s evidence to show that financial planning works too.
Research from Unbiased has shown that, those who take financial advice could find themselves saving an extra £98 each month, leading to additional income of £3,654 each year in retirement.
Furthermore, the Old Mutual Wealth report also shows that retirees who regularly seek advice from an independent financial adviser are 41% better off each year than those who don’t. Meanwhile, 53% of those who sought regular financial advice benefit from increased peace of mind about their finances.
So, if you were planning to retire at age 55, after 2028, we are here to help you achieve this aim, despite the new rules.
