Potential pensions changes were in the news this week. Whether the state pension age goes up in the 2030s or not, the normal minimum pension age is increasing from 2028.
As the Chancellor urges older people to return to the workplace because ‘Britain needs you’, without addressing the reasons why they might have left or be looking to leave, it looks like many of us will be forced to stay in work longer and longer.
It’s been a week of headlines about the age at which you can draw the state pension. It was reported that the Chancellor of the Exchequer is likely to announce in the March Budget that the Government is thinking of bringing forward to 2037 – seven years earlier than planned – the move to push the state pension age up to 68. The Government has since denied this, but an official review in 2017 suggested that it could be brought forward and the Government has previously said that it could change the date. Currently men and women can both draw the state pension from the age of 66. This will go up to 67 in 2028.
For the Government bringing the age forward could save money, but Age UK says it could spell hardship for many older people, given many are in ill health by the time they reach even the current state pension age. The Government may not want to rock the boat at a time when its popularity has been dipping and when older people are its main supporters, but it looks like the retirement will be going up and, if so, that needs to be accompanied by a plan for how to address the reasons some are checking out early.
Indeed, what is certain is that the ages that people can draw down their pension are moving upwards generally. A report earlier this week highlighted that many people may not be aware that the normal minimum pension age – the age at which you can start taking money from any other pension – is increasing from 55 to 57 from 6th April 2028. There are still some circumstances where you can take money earlier, for instance, if you’re suffering from ill health or have a protected pension age and some people may have a protected pension age through their profession which means they can draw down pension before the normal minimum pension age. This is the point at which many tend to drift off because, for some reason, pensions information seems to be designed to be opaque. Experts advise that you can still claim your pension before the age of 57 if you sign up to a pension scheme before 5th April 2023 and the rules stipulate that you can take it out from the age of 55. The rule means workers who want to flexibly access their pension can do so without facing huge tax charges.
Increasing numbers of people are drawing down part of their pension from their mid-50s while continuing to contribute through working part time on the side. You can usually withdraw a quarter of your money (25%) tax-free and can take this as one lump sum or in stages if your pension scheme allows it. There are risks associated – with less money in your pension pot it will grow less and there are several things to take into consideration, but it can be an option if you want to reduce your hours.
The other issue is the availability of part-time work, particularly well paid part-time work. A study published last week promoted innovation in part-time work on the back of what was learned during the flexible furlough scheme. Some people knit together a number of part-time roles to get greater flexibility and variety at work. The problem is ensuring that a part-time role is doable in the hours specified. There’s still a long way to go, but proper part-time options could provide people with greater choice over how they work.