Pensions access hike must not repeatWASPi furore

THE Government recently confirmed people will have to wait longer to access their pension pots – an announcement that probably went unnoticed by many.

The hike from 55 to 57 will take place in 2028 and mirrors the jump in state pension age to 67 between 2026 and 2028 for both sexes.

The pensions industry is anxious for clarity fearing a repeat of the rumpus which saw significant numbers of women maintain they were short-changed by being left in the dark about their state pension age increasing from 60 to 65.

Subsequently, the Backto60 campaign group, along with The Women Against State Pension Inequality (WASPi), called for compensation to be paid to the 3.8 million women involved. They argued it was brought in so quickly there was no time to make alternative plans.

However, the High Court ruled against them and so has the Court of Appeal.

The Government first indicated its intention to increase the pensions access threshold back in 2014 but did not legislate for it, encouraging some to hope it would never happen. But this month it said the move would go ahead “in due course”, reflecting trends in longevity, encouraging individuals to remain in work, and helping to ensure pension savings provide for later life.

Under current pension freedom rules introduced in 2015 individuals aged 55 and over can choose how and when they can access their savings.

Steven Cameron, pensions director at Aegon, insisted the country could not afford a repeat of the WASPi debacle.

Speaking to Which, he stated: “It may be that the change will happen on a fixed date such as 6 April 2028, the beginning of the tax year.

“If so, anyone who has their 48th birthday before 6 April 2021 will still be able to access their pension from age 55, but anyone even a day younger will have to wait another two years to start taking an income from their pension.

“Rather than 6 April, the Government may pick a date later that year, such as in October, when the state pension age becomes 67. Another option is to phase in the change, similar to the gradual increase in state pension age.”

Moira O’Neill, Interactive Investor’s head of personal finance, commented: “We have known for several years that the private pension age would be linked to increases in state pension age.

“But any increased restriction on access flies in the face of pension freedoms and feels like an extra kick in the teeth at a time when many people are reassessing their work/ life balance after a terrible year socially, emotionally and economically.

“Not so long ago, the private pension age was 50. Most of us have long accepted that we are probably going to have to work for longer than we might have liked – but it’s always good to have the option of retiring sooner. Whilst there is eight years to plan, the change could prevent some couples from enjoying retirement together. Many might have an older partner and wish to retire at the same time.

“Retirement is no longer a cliff edge and many people scale back work life more gradually, some switching careers, or even starting up new businesses. They may want to access a small part of their pension at an earlier age to do this, while keeping the bulk of their nest egg for later life.

“It highlights the need to use ISAs alongside pensions. Those with ISAs will have more flexibility to plug the two year gap in income as a result of reduced access. People need time to digest the news and plan ahead.”