Pension age steps closer to 57

At present, the normal minimum pension age (NMPA) at which you can draw benefits from a pension scheme is 55. That age ceiling took effect in April 2010 and was subject to a limited range of transitional rules if you previously had the right to draw pension benefits earlier than age 55.

Back in February, the government published a consultation paper on raising the NMPA to 57. The paper came as no surprise, except for the time it took to emerge. A NMPA of 57 was originally announced in 2014, but then apparently lay dormant until about a year ago when the Treasury was forced to confirm it in response to a question posed by the Chair of the Work and Pensions Select Committee.

The consultation paper has now been followed up with draft legislation that will appear in the Finance Bill 2021/22. Although only one digit is being changed – 5 to 7 – that draft legislation stretches to just over three pages:

  • It confirms that the new NMPA will take effect on 6 April 2028, by which time the State Pension Age will have risen to 67.
  • The NMPA will remain at 55 for members of “uniform services” (i.e. armed forces, police and fire services).
  • There is no phasing: if you were born on 5 April 1973, in theory you can draw benefits on your 55th birthday but leave it 24 hours and you will have to wait another two years, unless you can take advantage of the various transitional provisions.
  • The existing transitional provisions for the change to 55 remain in place.
  • A new set of transitional provisions will allow pre-57 access if, on 11 February 2021, your pension scheme rules gave you an unqualified right to draw benefits before age 57. To qualify, you must have joined the scheme by 5 April 2023.

In practice, retirement at age 55 or even 57 is a huge challenge financially. For example, the rate for an RPI-linked annuity at 55 is about £16.50 per £1,000 of pension fund, so even a fund equal to the current lifetime allowance (£1,073,100) would not produce £18,000 of inflation-proofed income. As with all pension changes, the devil is very much in the detail.

The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Important information:

This document is marketing material. This document is provided by the author and may not necessarily represent views expressed in other Aspect8 communications, strategies or funds. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. The sectors, securities, regions and countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Aspect8 does not warrant its completeness or accuracy. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Aspect8 has to its customers under any regulatory system. Regions/sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. This content is issued by Aspect8 Limited, Holmwood House, Broadlands Business Campus, Langhurstwood Road, Horsham, West Sussex, RH12 4QP. Registered No. 07572431. Authorised and regulated by the Financial Conduct Authority, FCA no. 227247.


Topics:

  • Article