05 Oct 2020
What seems like a lifetime ago, in 2014 the government announced that it was planning to increase the age at which someone can access their private pension (including their workplace pension) to age 57 from age 55. This is due to be implemented in 2028.
Although things have been quiet on this topic since 2014, in response to a written parliamentary question posed on 3rd September, the Treasury confirmed that it is still intending to push ahead with these changes.
The Treasury have provided some reasoning behind these proposed changes which are three-fold in that they are designed to:
- Reflect trends in longevity. i.e. people are living longer
- Encourage people to remain in work
- Ensure pension savings provide for later life
The cynics amongst us may feel that people remaining in work should mean more taxes being paid and therefore more revenue to HMRC which in the current climate must be a surely be priority to HMRC. Moreover, if people access pension at a later date then this should reduce the chances of people spending their funds more quickly than they should and as a result should be less likely to rely on the government to support them financially in their later years.
The biggest issue that the government needs to deal with is the finer detail around this change and how this message is communicated as the government surely cannot afford a repeat of the mess that was created when the state pension age moved from 60 to 65. The government could look at making the change at say the beginning of a tax year in 2028 or even in the October of 2028 as this is when the state pension age changes to 67. This does come with its own problems due to a hard cliff edge with people winning or losing depending on what side of the line they fall on.
If the government decide to phase in the changes in that same way as they did when they changed to the current state pension age then this also could have problems due to the opaque timing of the changes and their already poor track record of communicating such radical changes to the wider population.
As we sit here today, I am not personally against these changes as I do understand, and to an extent, agree with the reasons for them. This change has not as yet been rubber stamped by government however in my opinion the government need to come forward with more details about their plan as soon as possible so that the adviser community can help in getting the message out to the nation to ensure people can plan properly for their retirement.