The minimum pension age is set to increase to 57 under plans unveiled in a government consultation today (11 February).
At present, people aged 55 can access their retirement funds but the age limit is likely to increase by two years under plans laid out by the Treasury.
The Treasury consultation said the government intended to legislate to increase the normal minimum pension age to age 57 on 6 April 2028.
It said: “Increasing the normal minimum pension age reflects increases in longevity and changing expectations of how long we will remain in work and in retirement.
“Raising the normal minimum pension age to age 57 could encourage individuals to save longer for their retirement, and so help ensure that individuals will have financial security in later life.”
Members of the firefighters, police and armed forces public service pension schemes would not be affected by the change, it added.
The consultation also seeks views on the proposed protection regime for members of other pension schemes.
The minimum pension age was introduced in 2006, the Treasury said, “to ensure a balance between the generous tax relief that the government provides to enable people to save for retirement and setting the right incentives for them to accumulate sufficient pension savings and not fall back on state support in retirement”.
It was increased from 50 to 55 in 2010 to encourage people to “work for longer”.
Canada Life technical director Andrew Tully said: “This confirmation of the timing of the increase in the normal minimum pension age will be welcome to individuals and advisers and give time for appropriate planning over the next seven years.
“A protection regime will benefit those who currently have a right to take benefits before age 57, but it is disappointing to see the government propose a continuation of the existing ‘block transfer’ rules.
“These rules are complex and can prevent individuals from benefitting from the pension freedoms, by taking the most suitable option for their circumstances. Removing the block transfer rules and allowing those affected to keep their entitlement to a lower pension age on transfer would be a positive move.
The increase to the normal minimum pension age is in line with the increase in state pension age to 67.
The consultation stated the government believes that schemes should be free to decide how and when to move to the new minimum pension age by 2028 – meaning some schemes could increase the minimum age before 2028.
The government has also set out a planned protection regime – meaning a member of any registered pension scheme who has a right under the scheme rules at the date of this consultation to take pension benefits at an age below 57 will be protected from the increase in 2028.
Canada Life explained that individuals who do not have a protected pension age but take scheme benefits before age 57 after 5 April 2028 would be subject to unauthorised payments tax charges.
It said: “The government proposes that individuals should retain their protection as part of a transfer from one scheme to another where they become a member of another pension scheme as a result of a block transfer (broadly speaking a block transfer is where two or more people transfer from the same transferring scheme to the same destination scheme at the same time).”