Retirement plans could be ruined for people in their 40s because they aren’t aware that the minimum age required to access private pensions is 57. This will happen in six years.
Research reveals that 4/5 of 40somethings do not know that the Government will raise the retirement age to 55 for workers and individuals saving for their own retirement.
The Pensions Management Institute warns that many people are eager to receive benefits immediately.
Plan for Retirement: The government will increase the minimum age that people can get private pensions, from 55 to 57 by 2028.
PMI is a trade association for professionals in pensions. It found that 18% in a poll of 2000 workers 40-49 believed the minimum retirement age required to access private pensions would increase over time.
Only 4 percent could identify the minimum age at 55. This indicates a greater lack of knowledge about these rules.
Lesley Alexander, president of PMI says that these results are especially concerning because they indicate strongly that the Government failed to inform the public about a substantial change in the pensions policy.
“This announcement comes six months after Parliamentary and Health Service Ombudsman ruled that the Department for Work and Pensions had failed to give adequate notice about the increase in state pension age for females born between 1950 and 1960.
“There’s a very real chance of another embarrassment.”
>>>How do you bridge the savings gap if you decide to retire at 55 anyway? Below are some tips to help you get started
Is it possible for the government to work with these plans?
First announced by the Treasury in 2014 was the increase in the minimum age that people will be able to access private pensions. This would have been effective in 2028.
In February 2020, it confirmed the intention of its founder and opened a consultative process.
It closed the loophole in November last year to prevent confusion and fraudsters from exploiting savers.
According to the original plans, those affected by the changes who transfer to a plan with a protected’ pension age before April 2023 may be eligible to receive their money at the new lower age.
Rethink was needed after a barrage industry criticisms about fraudsters encouraging people making transfers off the back of it.
Treasury declared that, unless someone is currently completing a pension transfer to continue receiving the benefits of the age 55 threshold, there was no option for you to do that.
Industry critics caution that there may still be pitfalls for those who save money and are affected by changes to the time they can withdraw from their private pension accounts.
According to PMI, the PMI believes that the rise in the retirement age to 57 years is complex because it won’t apply to all.
It explains that those who receive benefits from a public-service pension plan and those who are part of private sector agreements will still have the right to a 55-year-old pension.
Alexander states, “It’s vital that the public knows clearly what their retirement options are.”
‘With the pensions dashboard due to arrive in 2023 – giving people the chance to review all their pension savings in a single place – it will only cause confusion when people learn that they will become eligible to draw benefits at different ages.
“It is urgent that a new communication strategy be developed to communicate this information to the public.”
Tom Selby from AJ Bell’s retirement policy department called the Government’s plans ‘bonkers.’ In an article published by This is Money, he described them as ‘bonkers.
He points out the possibility that people could be transferred from a plan with a minimum pension age to a one with less protection.
The Association of British Insurers, an industry body, says that most savers will have multiple pension pots and many millions will have a mixture. Some pots can be accessed at 55 and some they must wait until 57, making it more difficult to plan for retirement.
“It’s vital that the Government and the Pension Sector work closely together to ensure customers know their pension status and how they can access it.
Steve Webb is an ex-Pensions Minister, and is currently a partner in LCP. See the box to the right for the column.
According to him, “It would make things easier if government just left the current situation as it is and let people access their retirement at 55 if that’s what they want.”
What do you think the government says?
A spokesperson for the Government stated that the increase in the minimum age of retirement to 57 years was announced 14 years before the change. This is to allow people to plan their financial futures.
‘We are revolutionising how consumers keep track of their pension information by introducing pensions dashboards – a single online place for people to access via their digital device at any time, putting the saver more in control and transforming how they think and plan for their retirement.’
In 2023, pension dashboards will be available. They were originally planned for 2019. This is a way for people to view their retirement savings in one place online.
Workplace savings have been boosted by an additional £28.4billion a year since the launch of auto-enrolment in 2012.
More than 10 million people have now signed up for pensions. Employers are required to pay for employees unless the employee opts out.
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