Did you know that in 2028, the earliest age we can take our pensions is rising from 55 to 57?
You will not have access to your pensions until you are 57 – which, for most people, will mean that retirement will not be financially possible until they reach that age.
For the 14 million people in the UK who are now in their forties, the possibility of early retirement will be put back by two years.
Trouble is, so many don’t see it coming, and are going to be caught out.
New research by the Pensions Management Institute (PMI) asked 2,000 people if they were aware of these impending changes, and found that 82 per cent of working people in their forties hadn’t a clue.
The government originally sweetened this bitter pill about the higher pensions age by giving people the option of joining, or transferring their pension into a scheme that would protect them from the new rules – by giving them what is called ‘protected pension ages’. In other words, they could still have taken their pension at 55.
But last November it closed this window without prior notice, and the last applications to join a protected age scheme were accepted on November 3.
Now, the only exceptions to this important change are those in a public service pension scheme, such as firemen, police and armed forces, and those who are members of certain private sector arrangements.
Now. The plot thickens.
Next year (2023) will mark the arrival of the ‘pensions dashboard’, where you can log on and see the details of your various pensions all together on one web page.
The dashboard is designed to provide clarity about our pensions, but many are saying that the way the new pension age is being introduced, applying as it does to some but not all, will ensure that some confusion continues.
Obviously you will probably be aware if you are a fireman or not, but you may not know which rules apply to your pension scheme.
People’s current lack of knowledge about their own pensions was further underlined in the PMI study, when it appeared that just 4 per cent of those polled knew today’s pension age, and only 14 per cent had spoken to an adviser about planning their retirement.
Those in their forties, who will be the first to be affected by the rise in the pension age, also face a number of other historical challenges affecting their retirement planning.
Many of them entered the job market too late to benefit from final salary pensions, those generous pensions that guaranteed a certain level of income at retirement, linked to your final salary and your number of years of service.
Second, their ability to save was torpedoed by the ‘Great Recession’ of 2008-2013, when they were in their prime saving years between 28 and 43. As belts were tightened, many were forced to freeze their pension contributions during that period.
No wonder the International Longevity Centre (ILC), in their report ‘Forgotten Generation? Retirement Income prospects of Generation X’, predict that a third of those in their forties today run a real risk of retiring with insufficient incomes.
Planning your retirement, always an important task, has never been more essential, and, as the PMI hinted in their report, professional advice has never been more necessary.
Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005 . Further information on our Facebook page “Kennedy Independent Financial Advice Ltd” or on our website www.mkennedyfinancial.com
