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Should the age at which pensions freedoms apply stay at 55?

18 September 2017

What we will see going forward? Will the Government raise the age in line with the State Pensionable age? Should people be retiring at age 55? Steven Cameron, pensions director takes a view.

The pension freedoms have proved very popular since they were introduced 2 years ago, with an increasing number of people choosing to access their defined contribution pots flexibly from as early as 55, the current minimum age. This age, however, is not set in stone. The Government previously indicated it would increase the minimum age for accessing private pensions in line with increases in state pension age, with the first increase to age 57 anticipated in 2028 when state pension age increases to 67.  However, this has yet to be built into legislation.

Recent confirmation that the state pension age will increase further to 68 earlier than previously expected could have knock-on consequences for those hoping to make early use of the freedoms, and savers need to be clear on this.

With ongoing controversy over poor communication of increases to the state pension age for women, it’s important the Government gives as much advance warning as possible of any changes in the minimum age for accessing pension freedoms. This needs to be communicated widely to avoid people wrongly assuming that the age 55 is ‘hardwired’ into the pension system.

The Government has committed to giving people at least 10 years’ notice of any further increases in state pension age. This principle should also apply to communicating any increase in the earliest age for accessing private pensions.

To date, the Government has not indicated any change to the minimum access age when state pension age begins to increase to 66 starting next year. Changing the rules at such short notice would be hugely disruptive to the plans of thousands of individuals and would be highly unpopular.

The state pension age is increasing to reflect increases in average life expectancy, and it is likely people will also work later into life as well. Taking retirement income from as young as age 55 should be very much the exception and not the rule, and people should first seek advice.

But that’s no excuse for not communicating the rules clearly to allow people to personalise their retirement planning.


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