Aegon’s latest research highlights a significant lack of awareness of this change which could have knock on impacts for those planning ahead to access their pensions. The research also reveals that transitional proposals, allowing individuals to keep their access age at 55 in their current scheme but lose it on moving to a new scheme, could discourage people from transferring to better value pensions.
Normal Minimum Pension Age
The research shows there is a good understanding of the current normal minimum pension age amongst adults. 83% of those surveyed were aware there’s a minimum age to access a pension, with high scores across all age bands including 18 to 34-year-olds. Two thirds (64%) also correctly identified age 55 as the current minimum.
However, people are far less aware of the government’s plans to increase the minimum age from 55 to 57 in April 2028. Overall, 7 in 10 adults (68%) said they did not know of this and awareness was even less amongst younger age groups with 83% of 18-34 year-olds unaware of this change.a
Keeping or losing age 55 access
HM Treasury recently set out proposals on how to implement the increase. This included allowing individuals already in a scheme with an ‘unqualified right’ to take benefits from age 55 to keep this. But those joining a new scheme after 11 February this year (2021) won’t gain access after April 2028 until age 57. In a further complication, those transferring from an existing to a new scheme will also lose the right to access before age 57 unless they are transferring on a scheme wide ‘block’ basis.
This means if the current transitional proposals go ahead, individuals considering transferring face extra complexity and many in the pensions industry fear this could put people off moving their pension to a different scheme offering better value for money.
Aegon’s research confirms these fears, showing that 44% of of adults aged 35-54, the first age group who’ll be hit by the proposed changes, would be put off transferring to a better value scheme if doing so meant they lost their right to take their pension from age 55. But, moving to a new scheme with lower charges, better investment options and more engaging communications can make a big difference to retirement outcomes.
Steven Cameron, Pensions Director at Aegon comments: “The government’s intention behind increasing the normal minimum pension age from 55 to 57 is to encourage more people to work longer and to save sufficiently for retirement. As people on average are living longer, this has merit, but people need to know about the change well in advance.
“Although the number of people who access their pension at age 55 is relatively small, any increase to the minimum age must be communicated widely and well in advance of April 2028, so that people who are planning ahead aren’t left disappointed. The research shows that most people are unaware of the change and it’s something both Government and the pensions industry needs to highlight without delay.
“Furthermore, the proposals on how to introduce the increased minimum access age present a number of challenges and complexities. Our research confirms our fears that individuals might shun transferring from their current pension scheme if they lose their right to access their pension from age 55. There are many situations where people might benefit from transferring to a new pension, including moving from schemes with higher charges, less flexibility or poorer investment choices. Choosing to ‘stay put’ on the slim chance you might want to access your pension from age 55 could have a big and damaging impact on retirement outcomes.
“Seeking professional financial advice could help those facing difficult decisions in weighing up their options when transferring or consolidating their pensions.”
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