29 Jul 20

Pensions

Did you know – the Pensions Freedoms age may rise in 2028?

The Pensions Freedom age is currently 55 but may well rise to 57 when the state pension age rises to 67 in 2028. We take a look at how this may affect you and your retirement planning.

What are Pension Freedoms?

The Pension Schemes Act 2015 changed the rules around pensions, giving people greater freedom and more choice around how they accessed their pensions.

It meant that people over 55 would no longer have to purchase an annuity to access their pension income. They could instead enter drawdown or choose to take a cash amount. It made it easier for you to consider retiring prior to the state pension age. Pensions Freedoms also allows you to access your pension in the way that best suits you, your personal circumstances and your long term retirement plans.

For example, you could access a cash lump sum for house repairs, or that dream holiday you’ve always promised yourself. Our you could choose to drawdown a regular income but keep working part time, allowing you to gradually ‘wind down’ to retirement.

How will this change affect me?

Let’s be honest, 2028 might feel a long way off, and so might your retirement date, but this change in the age for Pensions Freedom will have an impact on your retirement planning.

It’s best to start accommodating for this change as soon as you can, to ensure it has the least effect on your pension plans. The change will mean that you have to wait two more years to access the options that the Pensions Freedoms offer.

Here are some recommendations as to how you can start accounting for this change within your retirement planning:

• If you were going to take up the option of accessing your pension at 55 years old, consider what additional funds you will need in order to wait two additional years. This may mean that you invest money elsewhere to make up the shortfall.
• Is your pension strategy the most suitable one for you? You have a variety of options under Pensions Freedoms about when and how you access your pension, such as an annuity, drawdown or taking a cash lump sum. Each of these options will have a different impact on your long term plans. Is what you plan to do really the best option for you and your personal circumstances?
• Get professional advice about your pension. Speak to an Independent Financial Adviser to get more information about how this change could affect you and advice on how to approach your retirement planning accordingly.

Need some help with your retirement planning? True Bearing would be happy to answer these or any other financial planning queries that you may have.