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.

Retirement planning: The Government will increase the minimum age at which people can access their private pensions from 55 to 57 in 2028.

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.

How about the age of state pension? 

The Government plans to increase the state pension for men and women from 66 to 67 in stages between 2026 and 202, and is currently reviewing when to hike the state pension age to 68.

The changes to the women’s state pension age proved controversial and caused hardship for many people, as well as years of legal action and protests.

Recently, the Parliamentary Ombudsman accused Government of “maladministration” over delays in informing women about an increase in state pension age by six years. 

“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.

I have a £1m-plus pension and will turn 55 in 2028 

Steve Webb (Money’s columnist on pensions) explains why the rule was changed and what it means for private pots.

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.

What can you do to close the gap of two years? 

Carla Morris: 'Even if you had your heart set on retiring at 55, you can spend the extra two years building up your investments and savings'

Carla Morris: Even if you were set on retiring at 55 you could spend the additional two years building up savings and investments.

The Money Project examined the ways that savers can bridge the 55 to 57 gap if they are looking for cash or want to retire earlier. here.

These are the opinions of pension experts.

1. Verify your mortgages and loans

Carla Morris, Wealth Director at Brewin Dolphin, stated that if you have any debts you need to repay using the tax-free lump amount when you turn 55, it is a good idea to start speaking to your lenders immediately. 

“Discuss all of your options including options for extending the term of your mortgage or loan. This will help you to understand the potential repayments.

2. Other arrangements may be made to pay school or university fees

Morris stated that those who reach 55 years old when their children enter university might have considered using tax-free funds to pay their fees and school fees.

If you find yourself in such a position, make sure to make extra savings contributions to help cover costs. You can save more money if you get started sooner. Tax efficient investments like Isas ensure that returns don’t become taxed.

2. Review your pensions

Morris suggested that you determine if your pension will be delinked or “lifestyled” to find out.

“Some pension providers provide lifestyle funds that move your pension from higher risk to lower risk over time, particularly as you approach retirement age.

“If the provider has established a retirement date of 55 years, they could change the composition or invest gains too soon.

You can find out how to stop a retirement plan from being deregulated by This is Money.

Your Isas

According to Ian Browne (Pension expert at Quilter), having savings other than a pension wrapper allows you full freedom.

“It is unrealistic for most people to think they will retire in their 50s, unless they have significant private savings.

Because they do not come with tax relief, ‘Isas’ are less generous than traditional pensions.

“The downside to having a pension? You get the savings boost provided by the Government but your money will be kept for longer. An Isa allows you to withdraw funds at any time.

TOP TIPS FOR DIY Pension Investors

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