Pension age steps closer to 57

The government has published draft legislation to raise the minimum age for drawing pension benefits from 55 to 57.

The government has published draft legislation to raise the minimum age for drawing pension benefits from 55 to 57.

At present, the normal minimum pension age (NMPA) at which you can draw benefits from a pension scheme is 55. That age ceiling took effect in April 2010 and was subject to a limited range of transitional rules if you previously had the right to draw pension benefits earlier than age 55.

Back in February, the government published a consultation paper on raising the NMPA to 57. The paper came as no surprise, except for the time it took to emerge. A NMPA of 57 was originally announced in 2014, but then apparently lay dormant until about a year ago when the Treasury was forced to confirm it in response to a question posed by the Chair of the Work and Pensions Select Committee.

The consultation paper has now been followed up with draft legislation that will appear in the Finance Bill 2021/22. Although only one digit is being changed – 5 to 7 – that draft legislation stretches to just over three pages:

In practice, retirement at age 55 or even 57 is a huge challenge financially. For example, the rate for an RPI-linked annuity at 55 is about £16.50 per £1,000 of pension fund, so even a fund equal to the current lifetime allowance (£1,073,100) would not produce £18,000 of inflation-proofed income. As with all pension changes, the devil is very much in the detail.

The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.  

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