Pension: Expert gives advice on preparing for retirement
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Britons are able to access their private pension pots before they reach state retirement age, but the age at which they can draw their funds is changing. Some people are set to be hit by the changes, while others will avoid them. With savers also at risk of being affected by tax charges, it is crucial for Britons to know where they stand.
The normal minimum pension age (NMPA) is what decides when people are able to draw their private retirement savings. This was first brought in back in 2006.
The NMPA is currently set at age 55, and has been for over a decade, when it moved up from age 50 in 2010.
Anyone accessing their pension pots before then could be subject to punitive tax charges.
And Britons will soon have to wait even longer to access their money, as the NMPA is set to increase to 57 in April 2028.
This will be done to coincide with an increase to the state pension age, which is currently 66, up to 67.
However, some people will be able to avoid the rise and keep a lower NMPA.
If someone’s pension scheme offered a protected NMPA of 55 as of November 4, 2021 they will maintain this age going forward, and will not have to wait the extra two years.
People were previously allowed to transfer their funds to a scheme which offered this before April 5, 2023.
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However, this prompted concerns from those in the industry that allowing so many people to avoid the rule changes would cause unnecessary confusion.
There would even have been a scenario where children could have taken the option to secure a minimum pension age of 55.
Others were worried the changes would potentially expose more people to scams, as fraudsters may have sought to take advantage of the confusion and steal from British savers.
The Government later decided to bring the deadline forward, limiting some of these potential problems.
However, since many people will have already had an unqualified right to a NMPA of 55 before the new cutoff date, the issues may not be completely resolved.
There had been calls for the Government to circumvent any problems by simply treating everyone the same, with everyone either retaining a NMPA of 55 or making the jump to 57, but this has not happened.
There is a belief these changes could lessen the impact of measures being implemented to keep Britons more informed about their pension.
New, simplified and shorter annual statements are set to be introduced, which are designed to make it easier for people to understand their pension.
However, if people have two pension ages, due to some of their schemes allowing them to access funds at 55 and some at 57, they may end up getting multiple statements each year anyway.
The Pensions Dashboard is another resource which is set to be introduced, where people can see various pieces of information about their pensions.
But again, having different ages when different funds can be accessed could complicate the process for users.
People who are unsure whether they have a protected NMPA of 55 or not can contact their relevant pension provider.
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