Pension age fury: Savers warned ‘confusing rules’ will make it hard to access cash
Pension: Expert explains consequences of ‘cashing out’ retirement pot
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The Government will change the age at which pensioners can access their private savings pots, moving the minimum age from 55 to 57. The new rule will come into place in 2028 if Prime Minister Boris Johnson and his colleagues in Government follow through on the plan. But this has been condemned by the Association of British Insurers (ABI), who have warned the plans are “complicated”, “arbitrary” and “confusing”. While the minimum age will be moved back two years, confusing rules mean some people will still be able to access their pension at 55 as long as the scheme they are in has this written into its rules.
Former ABI tax adviser Dan Gallon explained this new rules.
He said: “HMRC have indicated that where pension schemes rules include a reference to benefits being taken from age 55, this would be an unqualified right; however, a reference to taking benefits from ‘normal minimum pension age’ would not meet the requirement.
“There will also be a ring-fencing where funds in a pot with protection are transferred to a new pension scheme, with funds transferred (and any investment income on those funds only) accessible at 55 whereas any new payments in would only be accessible at 57.”
Mr Gallon believes it will be unclear for many whether they can access their private pension at 55 or 57.
He added: “In the future, it appears the answer will be a muddle of 55 for this pot, 57 for that pot, it’s not clear for a third pot due to the terms and conditions not falling into HMRC guidance neatly and I have not been able to find out the terms and conditions of my fourth pot so have no idea when I can access those benefits.”
Another expert, Yvonne Braun,, urged the Government to make the system simpler for those saving for their pension pots.
She said: “People are living and working for longer so it is right the minimum age you can access your pension will rise to 57 in seven years’ time, in step with the state pension age rising to 67.
“Unfortunately, the government’s proposed implementation maximises the complexity of this change and would create enormous confusion for pension savers.
“We urge the government to rethink their approach and make it much simpler for consumers.
“Being able to access their pension at 57 from 2028 for the vast majority of people is clear, reduces complexity and poor outcomes, and simplifies planning for retirement.”
The state pension age has also been a subject of debate in recent weeks.
People can currently access their pension pot at 66, but the petition argued that dropping the pension age could help the UK’s economy recover.
It said: “Young people are struggling to find work and losing their jobs, due to the pandemic.
“Why not allow older people to retire earlier, thereby freeing up jobs for young people?
“There would be a cost, however surely a far more positive cost than paying Universal Credit?
“Not to mention the option of restoring the balance back into young people’s favour and helping restore their future.”
However, the Government has confirmed that it will not consider a policy like this.
At the beginning of August, ministers said they would not consider plans to move the threshold to 60 years old.
The Department for Work and Pensions (DWP) says lowering the state pension age to 60 would place an unaffordable and unfair burden on taxpayers.
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The DWP added that the state pension age has not risen for men and women, “the total additional cost to taxpayers would have been around £215billion for the period 2010/11 to 2025/26, in 2018/19 prices.”
The Government also announced last week that the triple lock will be suspended for a year.
The policy previously guaranteed the state pension payments would rise in line with the highest of inflation, average earnings or 2.5 percent.
However, the pandemic distorted earnings figures, meaning they are set to rise by 8.3 percent.
This was seen by many as unfair, as taxpayers who have been impacted by the health crisis would have to pay for the increase.
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