Millions of UK workers planning for an early retirement may have to wait even longer to access their private pension, as experts warn that the minimum age of taking out the funds could rise to 58 in a few years. The minimum age jump was previously expected in the mid-2040s, but is now projected for the late 2030s.
Right now, adults can access parts of their private or workplace pension pots from the age of 55. The age will rise to 57 from April 2028. However, a faster-than-expected rise in the state pension age could drag the private pension threshold up with it.
Decade-long gap policy
The policy of keeping the private pension access age a decade below the state pension age has long been maintained. The purpose behind this decade-long gap is to help ensure people do not exhaust their retirement savings before they become eligible for the state pension.
The state pension is available to all retirees who have built up sufficient National Insurance contributions throughout their careers. Private pensions, by contrast, consist of either employer-sponsored workplace schemes or personal retirement savings.
Earlier state pension age timetable
Under existing legislation, the state pension age is due to reach 68 between 2044 and 2046. But that timetable is currently under review. A recent report from the Office for Budget Responsibility suggested the increase could happen much sooner. If so, it would have a direct impact on access to private pensions.
It indicated that it expects the state pension age to reach 68 between 2037 and 2039, around seven years ahead of the original plan. The Treasury has not ruled this out. If the state pension age reaches 68 by the end of the 2030s, the private pension access age would almost certainly rise to 58.
Expert reaction
Steve Webb, a former pensions minister and now partner at LCP, told The i Paper: "In theory, in 2037 or realistically 2039, because that's when we actually get to 68, the private pension age could go to 58." He also described a rise to 60 as "perfectly plausible."
He added: "There is a possibility that the private pension age could move up faster than the state pension age." Although this does not yet represent official Government policy, the prospect has caused concerns for retirement planners who had been working to the mid-2040s timetable.
Tom Selby, head of retirement policy at AJ Bell, said the connection between state and private pension ages "has been seen as a sensible step to ensure people don't access their private pension too early and run out of money." He acknowledged that future increases would curtail the flexibility younger generations have over when they can tap into their savings.
