At present, individuals cannot take their state pension earlier than the state pension age set in legislation. For many years, this was 65 for men and 60 for women but the differential is being removed and the age equalised at 66 from 2020. While individuals can opt to defer starting their state pension in return for an increased annual amount, they can’t opt to take a reduced amount from an earlier age.
Aegon is adding its support to the growing demand for such flexibility. This would immediately alleviate at least some of the hardship facing WASPI women, by allowing them to draw their state pension from age 60, albeit in return for a reduction in the weekly amount, which would continue throughout their lifetime.
But rather than targeting a specific group, Aegon believes the flexibility should over time be extended to all future retirees, both men and women, allowing individuals more choice.
Steven Cameron, Pensions Director at Aegon said: “Last year the Chancellor revolutionised retirement choices by offering all those with a private ‘defined contribution’ pension vastly increased flexibility around when and how much they could take from their pension. This pro-choice move has been widely and warmly welcomed. The next logical step would be to offer new flexible choices within the new state pension.
“The improvements we are seeing in life expectancy mean the ‘default’ state pension age will inevitably continue to increase, to avoid placing increasing burdens on those of working age to support state pensioners. But while average life expectancy is increasing, ‘healthy’ life expectancy is much more varied, and working to more advanced ages may not be feasible for all based on health or the challenges of a particular job. This means further increases in state pension age have to be accompanied by flexibility for individuals to decide to take a reduced amount from an earlier age.
“There are knock-on considerations to explore. The Government won’t want to be seen to encourage people to leave the workplace earlier than they need to. Allowing state pensions to be taken earlier also brings forward state pension payouts, for the Chancellor, although over time the terms could be set to make sure this balances out. Implications on entitlements to means tested benefits also need thought through. These points of detail should now be investigated but this shouldn’t stand in the way of what would be a welcome pro-choice policy measure and also a potentially powerful vote winner.”
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