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How could the pension freedom age rise impact you?

Graham Smith

Graham Smith - Investment writer

Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

THE state pension retirement age isn’t the only number in the world of pensions set to rise. Under the latest government proposals, the earliest age at which you can withdraw cash from a private pension without facing tax penalties is set to increase from 55 to 57 in 2028.

The government confirmed that it wants to raise the national minimum pension age, or NMPA for short, when the state pension age is increased to 67 on 6 April 2028.

This proposed change will affect men and women equally and is designed to encourage people to save longer for their retirement and help ensure their financial security in later life.

Devil in the detail

The government recently published draft legislation on how it plans to implement its plans. If you have a private pension such as an occupational or personal pension, it’s worth checking to see if it is an age 55 scheme or one where you have to wait for the NMPA. If it’s the latter, you could be affected by the rule change.

But as ever the devil in the detail. One important detail is that if you’re turning 55 in 2028, working out when to access your pension could become very important indeed, although it’s worth noting that further guidance on these changes is expected from the government in due course.

If your scheme is based on the NMPA and you can’t take cash from it before 5 April 2028 because your birthday falls later in the year, you may have to wait another two years to do so.

People born before 6 April 1971 should be unaffected by this legislation because they will reach 55 by April 2026 and 57 before April 2028.

The government’s consultation document and consultation responses can be found here. Some customers may retain the right to draw benefits before age 57, however, this is dependent on the rules of their scheme as at 11 February 2021.

On the 11 February 2021 the Fidelity SIPP scheme rules stated that scheme members can access their benefits from age 55. Therefore, based on the information provided to date it is our current understanding that our pension would offer a right to access pension benefits at 55. This understanding will be formally reviewed once the full legislation and Government guidance is available.

We will publish further information on our website and in our scheme literature once the Government has published final legislation and guidance.

If you’re starting to think about your retirement, the Government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.moneyhelper.org.uk or over the telephone on 0800 138 3944.

Important information Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from your pension savings will not be possible until you reach age 55 (the government is proposing to increase this to 57 from 6 April 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.