The question of when someone can access their pension appears, for the time being, as being one without an answer for a large portion of the UK right now.
Currently, if you are aged 55 or over and have a defined contribution pension, in normal circumstances you are able to access it immediately.
Several years ago, the government announced that from 2028, the minimum age to access pension benefits was increasing from 55 to 57. Therefore, if your 55th birthday was after 6 April 2028, you would need to wait until your 57th birthday to access your pension. This was passed into legislation in 2020.
So far, quite straightforward and not at all in keeping with what we’ve come to know and love with pension legislation.
However, over the past 6 months the government have announced draft legislation which, if enacted, would mean protections may be available to individuals who would otherwise have to access their pension at age 57, and ultimately would enable them to retain their minimum pension age of 55. This would be retained provided they meet certain criteria, which are that:
- They have joined a pension scheme before 5 April 2023 (by pension scheme we are referring to SIPPs such as AJ Bell Investcentre, or other pensions such as occupational pension schemes, workplace pension schemes and other defined contribution pensions).
- The scheme allows access to pensions at age 55.
On the face of it these appear to be fairly low hurdles. But there are a few sticking points.
Who wouldn’t have a pension age of 55?
If the legislation passed in its current form and with relaxed rules as to which schemes could retain the age 55 pension access age, the majority of individuals who currently hold a pension, no matter their age, could access their pension at age 55, not 57.
It’s important to also remember that there is currently no minimum age for someone to open a pension, therefore someone born today and who had a pension immediately opened for them in a qualifying scheme (there’s a parent after my own heart…) could still, under draft legislation, have a minimum pension age of 55 in 2076!
Which schemes will get the protection?
Right now, within the draft legislation it appears that the schemes which will be offering access to pensions at age 55 are those whose scheme rules explicitly state the pension can be ‘accessed at age 55’. Those that will have a later retirement date, i.e. age 57, will have scheme rules which state the pension can be accessed at the ‘normal minimum pension age’.
Many of you are probably now wondering what AJ Bell Investcentre’s scheme rules say, as the majority of our clients have accounts with them. Currently, they state that access is at ’55 (57 from 6 April 2028).’ I am in close contact with them about whether or not these rules may be updated in the next few months, but this is not going to be a simple matter, if it does go ahead, and will likely lead to various pension schemes having discussions with the Ombudsman about where they stand.
My opinion, like much of the industry is that these potential exemptions are not in the spirit of the proposed legislation and I suspect that in the end the government will probably move to have this tapered back quite heavily.
Potentially, it may be that in the end only a few schemes will qualify for access at age 55, likely the armed forces and other similar roles, with the majority of schemes defaulting to age 57. However, it does throw up an interesting insight into the world of ever-changing pension legislation.
If you are in the catchment for these changes, we will continue to monitor actions with AJ Bell (and other pension providers) and the scaled-back scenario I’ve put above still appears to be the most likely one, but it is important for you to check any other pensions you have, potentially workplace pensions, to see if they might be affected.
- The content of this document is for information purposes only and should not be construed as financial advice
- We always recommend that you seek professional regulated financial advice before investing
