The age at which those with a private pension can begin to access their defined contribution pension is to rise from 55 to 57
Millions of people born in the early 1970s face having to wait an extra two years to access their private pension.
The earliest you can take money from your defined contribution pension is usually at the age of 55. This is called the normal minimum pension age (NMPA).
But from April 6, 2028, the NMPA will rise to age 57. It means that, if you are 55 or 56 when this happens, you might have to wait up to two more years. The move impacts pension savers born between April 6, 1971 and April 5, 1973.
According to the pensions app PensionBee, there is a small window for those people. They have from when they turn 55 to April 2028 to be able to access their pension, such as taking out one or more lump sums. The first 25% is tax free, up to a lump sum allowance of £268,275.
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Maike Currie, vice president of personal finance at PensionBee, explained: “For some savers this could come as a nasty shock. Many people simply assume they will be able to access their pension at 55, not realising the rules are changing.
“There is a very specific cohort – those born between April 1971 and April 1973 – who face a potential cliff edge. Miss the deadline to access your pension before April 2028 and you could find yourself locked out of your savings for up to two more years.
“That does not mean people should rush to raid their pension. In many cases, leaving savings invested for longer may lead to a healthier retirement pot thanks to a few additional years of extra contributions and investment growth. But it does mean people should start planning now.
“For anyone hoping to retire early, bridge a gap between work and retirement, or phase down working hours in their mid-50s, understanding these dates could be crucial.”
If you do take a lump sum from your pension, 25% of it is usually paid tax-free. The other 75% counts as earnings on which you could well be taxed. It also might affect any benefits you are entitled to claim.
And while it may be tempting to dip into your pension, remember that a retirement pot is designed for just that, to ensure you have money for hopefully many years to come.
People are being warned scammers might use the charge to target them.
MoneyHelper, a free service provided by the Money and Pensions Service, says if you get a cold call, text, email or visit telling you that you can access your pension earlier than age 55, it is likely a scam. Do not give them any information or try to take money from your pension. You could lose your money and face a large tax bill.
The increase in the NMPA coincide with an increase in the state pension age, which is set to reach 67 by 2028. It had been 65 for men and 60 for women for a long time, but recently rose to 66 for both men and women.
