Retiring is the focus point a lot of people build their savings towards and most look forward to, however, it’s also a political very hot potato – as it involves lots of money. The ramifications of the last major State Pension age switch and the subsequent actions brought by WASPI[1] are still rumbling from 1995 legislation, even as we prepare for more changes. In November 2018 for men and women, State Pension age was 65 and Personal or Company Pension age was 55. For most people, this is changing.

Pension age is gradually increasing and now depends on when you were born.

For state pension, it has been finalised (for now) and roughly is –

– If you are born pre – April 1960 you can receive your pension by age 66

– If born April 60 – March 61 a sliding scale (so 66 and a bit)

– March 1961 – April 1977 it’s 67 and a bit

– April 1978 onwards, it’s 68

State Pension age is going to be kept ‘under review’, which means that it will most likely change again in the future, depending on factors such as life expectancy changes. Some groups have already proposed (and had rejected) state pension age should be 75 by 2035. Making personal or company schemes even more critical if that happens.

Personal or Company Pension – proposals

Anyone who was a member of a registered pension scheme on 11 February 2021 and had a right to take pension benefits before age 57 on that date, would keep that right as a protected pension age (usually would be age 55, but some might be lower).

– Anyone joining a new pension scheme from 12 February 2021 onwards would have a retirement age of 57 from 2028 for that scheme, (although of course, they may have other pensions that they could still access before age 57 that are not affected).

– From 12 February 2021, anyone who transfers into a new scheme would lose the right to take benefits from that pension before age 57.

– This could affect people halfway through the process of switching pension providers.

– Therefore, potentially lock people into older, inappropriate or expensive schemes.

– Unless they utilise the ‘block transfer’[2] rules to switch.

– One key difference highlighted between the rules used previously when pension ages increased, and these proposals are that clients would not need to crystallise[3] all the benefits within a scheme on the same date in order to keep their protected pension age.

What now?

The consultation doesn’t close until 22 April, and we don’t expect to see draft legislation from the Treasury until maybe even after the summer. However, if as expected these proposals do go ahead, new plans and transfers that take place from rightnow could affect when people are able to take benefits. While most people may not expect to retire at 55 or 56, they may have wanted to access the PCLS[4] element, so it still adds an additional consideration into pension planning. Anyone born before April 1971 it appears won’t be affected by any of these changes, but everyone born after that date may need to consider the implications. Professional, independent advice is the key to ensuring good intentions don’t accidentally lead to the wrong outcome. We’re here to help at hello@ssfs.co.uk if you want a chat.

[1] Women Against State Pension Inequality – a group campaigning for women born in the ’50s affected by the previous increased age. [2]A set of rules that have always been around to help preserve benefits from old schemes, involving more than one scheme member transferring out to the same new scheme at the exact same time. [3] Crystallise means take the tax-free cash out of the pension. [4] PCLS as Pension Commencement Lump Sum, better known as Tax-Free Cash and is normally 25% of the pension pot.