The UK government issued a consultation this month to increase the minimum pension age for occupational and personal pensions from 55 to 57 in 2028. This follows the UK government confirming these plans in 2020 and the UK coalition government announcing the same increase after a consultation back in 2014.
The government believes that increasing the minimum pension age “reflects increases in longevity and changing expectations of how long people will remain in work and in retirement”. It is also in line with the government’s view that the minimum pension age should be around 10 years below the UK state pension (which will also be rising on a phased basis to age 67 and eventually 68).
The proposed increase to the minimum pension age will not apply to pension schemes for the armed forces, police and fire services in recognition of their special position.
The UK government first introduced a minimum pension age of 50 in 2006 to “ensure a balance between the generous tax relief that the government provides to enable people to save for retirement and setting the right incentives for them to accumulate sufficient pension savings and not fall back on state support in retirement”. This was then increased to 55 in 2010.
When the minimum pension age has increased in the past, the government has included protections enabling qualifying persons to retain their prior minimum pension age. The consultation issued this month also consults on a protection framework whereby members of existing registered pension schemes would be able to retain their current minimum pension age of 55.
Whilst the government is giving people lots of advanced notice to this change, it may alter people’s plans for how and when they first access their UK pension. As always, it is important that any decision to access a UK pension should be based on solid financial planning and not just be a knee jerk reaction to changing legislation. Florin Pensions’ view remains that in most cases it is best not to access tax deferred UK personal pensions or US retirement accounts until in retirement.
At Florin Pensions, we are consulting with our clients’ UK pension providers to discuss this consultation and the proposed protection framework. The UK government consultation closes on 22 April 2020 and the government plans to publish draft legislation in summer 2021. We will update you as this matter develops to confirm how these changes could impact your UK pension in the future.