Will I be affected by the increased age limit on taking pension benefits?

Ask the experts. Rachel Vahey is here to answer questions on pensions. If you'd like a question considered for a future edition, send it in now.
Currently the earliest one can access their pension benefits is upon reaching the age of 55. The government announced this limit would rise to 57 from 6 April 2028.
Having saved diligently and invested aggressively into my own SIPP, early retirement is a possibility once I turn 55.
I read that only those born prior to 6 April 1971 would truly be unaffected by the legislation (they would turn 57 on or before 6 April 2028). For those born after 6 April 1973, the position is clear, unfortunately they would not be able to access their benefits until they turn 57.
This leaves those born between 6 April 1971 and 6 April 1973, and it was implied they would be able to access their benefits from the day they turn 55 until the 6 April 2028 but then would somehow be prevented from accessing their benefits until their 57th birthday. Is that correct?
Phil

Rachel Vahey, AJ Bell Head of Public Policy, says:

The normal minimum pension age (NMPA) is the earliest age someone can access their pension. You are right that for most people this is currently age 55 and will increase to age 57 from April 2028.

However, despite this change being announced several years ago, we have very little practical information on what it means for those who are around that age who want to access their pension.

If you are younger than age 55 on 6 April 2028 then you cannot access your pension, and you will have to wait until your 57th birthday before doing so.

But as you say, there are a few questions for those who born between 6 April 1971 and 5 April 1973 who will be over 55 in April 2028 but not yet 57. It may be easier to break down the options for this group.

First, if the pension saver has not yet accessed any of their pension, then they will not be able to do so until they reach age 57.

If they have accessed their pension and bought an annuity, then the annuity payments will simply continue. It’s very hard to see how they could be stopped ‘mid-flow’.

What if you're already in drawdown?

Likewise, if the pension saver has accessed their pension and moved it to drawdown, they should be able to continue to withdraw money from these drawdown funds. Those with drawdown can take as much or as little money as they want, and they can also stop or start it when they want to.

The tricky part comes when we think of those who have taken part of their pension, and, say, moved it into drawdown. But still have part of their pension they haven’t accessed – the ‘uncrystallised’ part.

We don’t yet know what the rules are for this situation. On the one hand, it seems likely the pension saver won’t be able to access any more pension until they reach 57. But there are some pension savers who have set up an arrangement with their pension provider to regularly access chunks of their pension pot on a pre-arranged basis. This is often called phased drawdown or drip-feed drawdown. If this arrangement was stopped mid-way, then this seems a cruel outcome for those affected.

When will we know more?

We have been waiting for several years now for the government to clarify what the ‘transitional rules’ are for this situation. Although there is a hope that the next Finance Bill, due late November or early December, will include the legislation needed.

In the meantime, I would offer a general reminder to always think through the implications of accessing your pension from such an early age. Many people will rely on their pension to provide them with an income for the rest of their lives, however long that should be, so consider carefully whether that income will be sustainable for the next 30 or so years.

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Rachel Vahey, AJ Bell Head of Public Policy, says:

What if you're already in drawdown?

When will we know more?

Rachel Vahey: Head of Public Policy