Changes to pension access rules coming in April 2028 could affect when you access your money
Changes to pension access rules are set to come in April 2028 (Image: Getty)
Millions of pension savers are being urged to check when they will be able to access their retirement funds. This is ahead of sweeping rule changes due to come into force in April 2028.
As reported by the Daily Record, the Normal Minimum Pension Age (NMPA) – the earliest age at which most people can access private pension savings without incurring tax penalties – is set to increase from 55 to 57 on April 6, 2028.
While the change will not affect everybody, financial experts are cautioning that a “middle group” of savers could unwittingly face a gap of up to two years before they are able to access their pension funds. The change applies to private pensions, including workplace pensions and personal pension schemes.
Gary Smith, Partner in Financial Planning at wealth management firm Evelyn Partners, said: “This seemingly straightforward rule change could catch out thousands of unsuspecting pension savers.
“Many face a cliff edge, where their ability to access their pension is suddenly put back for up to two years.”
Under current rules, most people can begin accessing private pension savings from age 55 (Image: Getty)
Under existing regulations, most people can begin drawing from their private pension savings from the age of 55.
However, from April 2028, the minimum access age will rise to 57 for the majority of savers, as part of broader measures to reflect increased life expectancy and shifts in the State Pension age.
The group most significantly impacted are those born between April 6, 1971 and April 5, 1973. These individuals will reach the age of 55 during the two years prior to the rule change taking effect.
Individuals within this age bracket may still be able to tap into their pension savings at 55, but only if they take steps before April 6, 2028.
Should they fail to access or ‘crystallise’ their pension ahead of the deadline, they may then need to wait until age 57 before being able to withdraw funds without incurring tax penalties.
Gary Smith said: “All savers in their early fifties need to be aware of how their age might mean they need to rethink retirement plans because their access to pension funds is either compromised or delayed.”
Under the proposed rules:
- People born on or before April 5, 1971 are unaffected and can still access pensions from age 55
- People born between April 6, 1971 and April 5, 1973 may need to act before April 2028 to avoid delays
- People born after April 5, 1973 will normally need to wait until age 57 to access pension savings
Evelyn Partners warned the changes could pose difficulties for those planning to retire at 55 or individuals hoping to use pension withdrawals to bridge the gap before reaching State Pension age.
Certain savers may need to depend on ISAs, savings or investments to meet living expenses if pension access is postponed.
The alert also arrives as pension savers face another significant retirement change from April next year when unspent money in defined contribution pensions is anticipated to fall under inheritance tax rules. Mr Smith noted that certain pension schemes may still provide a “protected pension age” permitting earlier access, however he cautioned that savers risk losing these protections should they transfer their pensions without seeking professional advice.
He added: “Some retirees look to take withdrawals from their pensions using flexible options over several years because of the tax advantages this can offer.
“However, after April 2028 some people could find they are unable to access additional pension funds until they turn 57.”
The armed forces, police and firefighters pension schemes will be unaffected by the changes, as they operate under separate arrangements.
Further details regarding pension access ages and retirement planning can be found on the GOV.UK website here.