Millions of pension savers are being stopped from transferring their retirement savings to preserve access to their pot from age 55, following a sudden u-turn by the Treasury.
Under current rules, savers are able to access their defined contribution pension pots from age 55, and do as they want with their retirement savings. However, the minimum pension access age is rising from 55 to 57 in 2028, so savers will have to wait an extra two years before dipping into their pot without facing hefty tax bills.
The change to the age at which you can access your pension was confirmed in July 2021, with the government stating the rise is based on expected increases in life expectancy, alongside changes to working patterns.
However, the plans originally had a loophole that enabled people to still access their pensions before the age of 57 by transferring their savings by April 2023 to a scheme with a protected access age of 55. This prompted criticism that scammers could take advantage of savers rushing to transfer their pots by the deadline, or that savers could end up moving their pensions into a scheme that might not be the best option for them. Read our article Government introduces measures to prevent pension scams for other changes recently introduced to tackle pension scams.
The transfer window was closed on November 3. John Glen, economic secretary to the Treasury, said: “After listening to stakeholder views on the draft clause, the government has decided to shorten the (transfer) window. This shorter window will help address the issues raised by stakeholders whilst also being fair for pension savers.”
Helen Morrissey, pensions expert at Hargreaves Lansdown, said: “The u-turn is welcome as keeping the loophole open would have left people vulnerable to scammers. There is also the chance people would have transferred simply to keep an access age of 55 without considering whether a transfer was truly in their best long term financial interests.”
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
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What does this mean for you?
If your pension states that you have an ‘unqualified right’ to take pension benefits at age 55, you should still be able to access your pension at this age. The age increase to 57 may also not apply if you are a member of some public service pension schemes. Meanwhile, if you asked for a transfer of your pension before the new deadline of November 3 to a plan with a protected age of 55, you should be able to proceed with this.
If you’re unsure when you can access your pension, check the details of your particular pension scheme, and whether the access age will rise alongside the government’s plans to increase this from 55 to 57.
Most of us have more than one pension pot at retirement, having worked for several different employers over the decades, and perhaps also having our own private, or personal pension savings. Some may be accessible at age 55, while others may require you to wait until age 57. This could make it more difficult to plan for retirement.
Morrissey said: “This change to the pension access age does not happen until 2028 so there is time to plan. For many people all the pensions they have accumulated in their working life will have an access age of 57 so if you wish to retire earlier than that then look at whether you have other assets you can draw an income on for those two years. You may also choose to shift to working on a part-time basis.”
“Some people will still have pensions that have a protected age of 55 written into their rules. It’s worth checking your pension paperwork to see if that is the case. If you do then you can access these pensions from the age of 55 and leave any others for a later date.”
Where to seek further help
If you are unsure how to manage your pension savings, the Government’s Pension Wise service, run by the Pensions Advisory Service and Citizens Advice, provides people aged 50 and above with free guidance on their pension choices at retirement.
It’s always worth taking advantage of a free appointment with Pension Wise. But if you want professional financial advice, you’ll need to speak to a financial advisor, as Pension Wise can only provide general guidance and not individual recommendations. Find out more in our article How to find the right financial advisor for you.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.