Steven Cameron, Pensions Director at Aegon comments: “In the private pension space, pension freedoms have proved hugely popular in allowing people to take more control over when they start drawing their defined contribution pension, currently from as early as age 55 increasing to 57 in 2028. But this is not reflected in the state pension where as of today (6 October) the minimum access age is 66 for all, and will increase further to age 67 in 2028. The higher the state pension age is, the more difficult it will be for those in stressful or manual occupations to keep working until state pension age. On top of this, the fall out of the COVID-19 pandemic may see an increasing number of those in their early 60s losing employment and struggling to find a new role.
“In these unprecedented times, we’d welcome the Government exploring allowing people to take their state pension from an earlier age, perhaps 63, at a reduced amount to reflect the fact it is starting earlier and will be paid for longer. People can already defer taking their state pension until later, receiving an uplift for doing so, and this would effectively mirror this facility at younger ages. Offering early access at a reduced level could be a big help to many thousands of individuals as a means of supplementing private or workplace pensions.
“There would be a need for some checks and balances to make sure people don’t end up with an income from state and private pensions combined below the means tested benefit threshold. But with some creative thinking, solving this shouldn’t be insurmountable and could be well worth the prize if it helps more people in the uncertain times ahead with a flexible transition into retirement.”
Andrew Tully, technical director at Canada Life comments on the State Pension rise to 66: “The State Pension is incredibly complicated for people to understand, however it forms the bedrock for most people’s financial plans in retirement. For the average couple the value of the state pension is equivalent to £600,000* so it is essential that those affected by today’s rule change understand how much they are entitled to receive.
“For anyone who might be unsure about their entitlement the first step should always be asking for a State Pension forecast. This will explain when to start expecting the payments and how much you are likely to receive. If there are any gaps, additional voluntary NI contributions can be paid to increase the amount received. People can also defer the state pension if they don’t need it and can stop receiving it once in payment if their circumstances change.”
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