The government recently commenced plans to increase the age at which people can begin to draw down their pension pot from 55 years to 57 years. This would imply, once the Bill is passed to legislate these plans, savers would have to wait an additional 2 years to access their savings- either as a lump-sum or by withdrawing the money over a period of time.

The increase in the normal minimum pension age (NMPA) is expected to occur from April 2028 and would coincide with the increase in state pension age from 66 to 67 is believed to reflect the evolving demographic changes and heightened life expectancy of individuals in the UK. Albeit questions might be raised about the impact of the pandemic on this data which is likely to have been collected prior to 2020.

If you’re born post 6 April 1973, the move is likely to affect you adversely since you would have to wait an additional 2 years before dipping into your savings. Nevertheless, the government has provided savers who wish to maintain the current NMPA of 55 years the opportunity to transfer their pension into a scheme which contains a NMPA of 55 years as of 11 February 2021. Additionally, the transfer of savings is required to be completed before 2023 which leaves individuals with the best part of a year and a half to preserve early access to their pensions.

Exempt from this rule change, however, are individuals who belong to ‘Uniformed pension schemes’ which comprises the police and fire services as well as armed forces who will all continue to be entitled to access their pensions from the age of 55 itself. The supposed aim of this change in rules is to avoid individuals from becoming bankrupt or insolvent in their retirement by encouraging them to build up their pension pot for longer. This would theoretically improve financial stability and wellbeing during retirement albeit the supporting evidence for this is inconclusive.

This change is amongst many relating to pensions in recent years which appears to corroborate public anger over constantly moving the goalposts when it comes to pensions. Constant changes in rules have led to majority of the population being unable to keep pace with these changes. The result was already evident during the pandemic when many drew down their pension pots earlier than 55 years of age and triggered a cut to their Money Purchase Annual Allowance, which we highlighted earlier.

To stay up to date with the latest information regarding pensions, tax, audit and other guidance from the government or HMRC, join Cheylesmore Accountants to ensure your business’s accounts are clear of penalties and inaccuracies. Feel free to give us a call today to discuss how we can support and grow your business to allow you to focus more on what matters most to you and leave the number-crunching to us.