Pension warning as millions could be blocked from touching savings until 60
Millions of pension savers could potentially be forced to wait until the age of 60 before accessing their private retirement savings, a former pensions minister has warned.
Sir Steve Webb, who is now a partner at pension consultancy LCP, said the normal minimum pension age (NMPA) could eventually rise beyond the planned increase to 57, although there are currently no legislated plans to take it to 60. Under current rules, most people can access their private pensions from the age of 55. This is due to rise to 57 from April 2028, following legislation introduced under the previous Conservative government.
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Sir Steve said he would not be surprised if the minimum age eventually increased again to 60, claiming there was little enthusiasm within Labour for the pension freedoms introduced in 2015.
He warned, however, that repeatedly changing the rules could create significant problems for savers, pension providers and the Government.
The former pensions minister said the transition from 55 to 57 was already complicated and argued that another increase would create further “administrative chaos”.
Raising the minimum age could encourage people to remain in work for longer and build larger retirement pots, potentially helping their savings last further into retirement. However, it could also have a significant impact on people who have already planned to reduce their working hours in their 50s or use their pension savings to fund major expenses.
Some savers may have expected to use their pension pots to pay for holidays, home improvements or financial gifts to children and grandchildren. A higher access age would mean those plans could need to be reconsidered.
The normal minimum pension age was previously increased from 50 to 55 in 2010. The rules were then transformed by the pension freedoms introduced by former Chancellor George Osborne in 2015.
Those reforms gave people much greater control over their retirement savings. Instead of being required to use their pension pot to buy an annuity, savers were given a wider range of options, including taking some or all of their pension as cash.
Sir Steve argued that the age at which people access their pensions may ultimately make less difference to retirement income than the amount they have saved.
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He said the typical pension pot accessed by people in their late 50s was less than £10,000, suggesting that spreading such a sum across a retirement lasting several decades would have a relatively small effect on someone's overall finances.
The debate comes amid growing concerns about the UK's retirement savings. Around 15 million people are estimated to be undersaving for retirement, while the Pensions Commission is examining how to improve the system.
Earlier this year, the commission said around one in three pension pots were being accessed early, with the money often being spent on purchases including cars, holidays and home renovations.
The State Pension age is also scheduled to rise, increasing from 66 to 67 by 2028 and to 68 by 2046. A separate review of the State Pension age is expected to report in 2029 and could recommend faster increases.
However, the Government has stressed that there are currently no further legislated changes to the private pension access age beyond the move to 57 in April 2028.
A Treasury spokesman said: “We do not comment on tax policy speculation. The normal age at which people can access their private pensions will be 57 by April 2028, as set out by the Conservative government in the Finance Act 2021-22.
“There are no further legislated changes to the normal minimum pension age.”