- The Association of British Insurers (ABI) has called on the government to implement a simpler approach around the pension age hike
- The government says that some savers secure pension age 55 . be able to keep
- ABI says 57 should be implemented across the board with limited exceptions
Pension industry insurers have called on the government to take a simpler approach when it can increase the age savers in their pension pot from 55 to 57.
The Association of British Insurers (ABI) says the 2028 proposals, set out in a consultation closing today, will cause ‘huge confusion for pension savers navigating the already complex UK pension system’.
Under the proposals, the government says some savers will be able to keep their protected pension age at 55, but the ABI says the age of 57 should be applied with only limited exceptions for uniformed services and those who have previously There was a protected pension age since .
The UK’s leading insurer trade body has called on the government to implement a simpler approach, when it could tap savers age 55 to 57 into its pension pot in 2028.
The increase in the ‘common minimum pension age’ is designed to reflect rising life expectancy and to remain in line with the state pension age, which is set to rise to 67 in the same year.
The age at which you can typically use a private pension for the first time without tax penalties is called the Common Minimum Pension Age (NMPA).
At present there are some limited exceptions where you can get your pension earlier and this is called protected pension age.
If the new proposals are put forward, lakhs of people whose age is 55 years as written in the rules of the scheme will be exempted from the age increase.
In an article written on behalf of the ABI, tax advisor and policy maker Dan Gallen explains how these ‘complicated’, ‘confused’ and ‘arbitrary’ allowances should be eliminated.
He says: ‘The proposals are too complex and will cause a lot of confusion for the millions of people affected as they will not be able to answer the question ‘at what age will I be able to access my pension’.
‘ABI now calls for the withdrawal of these proposals until something suitable for the purpose is developed.’
Gallen highlighted that making exceptions would lead to widespread confusion, especially among people who have multiple pension pots, with different terms and conditions applied to each.
These proposals may lead people to turn to schemes that have a pension age of 55 years, leading to unfair competition within the industry.
In response to calls from ABI Tom Selby, head of retirement policy at AJ Bell, the agreement tweeted: ‘Agreed. The government’s plan to raise the minimum pension access age is a mess of complexity with little or no benefit. Taking the majority to 57 in 2028 and dismantling the proposed security system is the obvious solution.
At present there are some limited exceptions where you can get your pension earlier and this is called Protected Pension Age
In response to calls from ABI Tom Selby, head of retirement policy at AJ Bell, the agreement tweeted
Meanwhile, Becky O’Connor, head of pensions and savings at DIY pension platform Interactive Investor, said: ‘The complexity of pensions is already largely off-putting to people and can lead to incomplete decision-making with negative consequences. Further confusion should be avoided at all costs.
“If the minimum pension age is increasing to 57, it should be raised to 57 for all those with pensions. Any exceptions should be minimal, for example where the nature of the business may require prior access.
‘It is really important that the government acknowledges this response because the risk of confusion as well as behavior change that can worsen retirement outcomes for some is real.’
ABI is now seeking to raise the minimum pension age to 57 for all, with the above exceptions.
Galen concluded: ‘This means people are losing out on authority they would have otherwise – so this is not a decision to be taken lightly, but it is important for the sake of simplicity, and the increase is clearly indicated since 2014. .
‘Future UK pensioners deserve better. There are seven years before the proposed change – let’s use that time to find an adequate solution.’
How do you bridge the gap of two years?
Carla Morris: ‘Even if you had your heart set on retiring at 55, you could spend an extra two years growing your investments and savings’
This Is Money looked at how savers can bridge the gap between 55 and 57 if they want to retire early or need cash. Here.
Pension experts gave the following advice.
1. Check Your Mortgage or Loan
If you have a need to repay using your tax-free lump sum at age 55, you should start talking to your lenders as soon as possible, said Carla Morris, wealth director at Brevin Dolphins.
‘Discuss all the options available to you, including options to extend the term of the mortgage or loan. It is important that you are aware of what repayments may be required.’
2. Make other arrangements to cover university or school fees
Morris said, “People who are turning 55, when their kids go to university, can do their taxes to pay fees or even to help pay school fees. -Might be thinking of using free cash.”
‘If you are in this situation, make sure you contribute additional savings to cover the costs. The sooner you start saving the better and use tax efficient investments like ISAS, it will ensure that the returns are not taxed.
3. Review Your Pension
Find out whether your pension fund will be risk-free or a ‘lifestyle’, suggests Morris.
‘Some pension providers offer lifestyle funds that move pensions from high to low risk over the years, especially as you move…