Treasury minister John Glen confirmed in a written statement this week that the Government planned to add two years to the age when the Freedoms can be unlocked.
He wrote: “In 2014 the government announced it would increase the minimum pension age to 57 from 2028, reflecting trends in longevity and encouraging individuals to remain in work, while also helping to ensure pension savings provide for later life. That announcement set out the timetable for this change well in advance to enable people to make financial plans and will be legislated for in due course.”
Quilter head of retirement policy Jon Greer said the news will be blow to some and force others to rethink their early retirement plans.
He said: “This will be a blow to some savers that had hoped to retire at 55. A few diligent pension savers are lucky enough to be able to afford to retire at 55 with a pension pot sufficient to last the rest of their lifetime. But in future that age will switch to 57 before savers can unlock their tax free cash and income from a retirement fund.
“Designed as a safety valve in the pension system, the minimum age for accessing a pension is intended to prohibit people from withdrawing too much of their pension too soon. Part of the trade-off for receiving pension tax relief and the perk of tax free cash is that savers have to commit to keep their money locked up till their mid-50s.
“Until we know exactly when the change will be implemented it is difficult to say with certainty who will be caught, but the cut-off point is probably going to be around those born in the early 70s and later. For those super savers that can afford to retire early, they might need to revisit their plans if they still hope to finish work at 55.”
Steven Cameron, pensions director at Aegon, said the Government had planned the move some years ago but needed to do more to alert people to the challenges.
He said: “The Government did indicate back in 2014 its intention to do this, but didn’t include provisions in legislation, leading to uncertainty over whether the change was still planned. This latest announcement confirms the change will happen meaning those retiring in future will have to wait longer to access their pension. It will be particularly impactful on those who were due to reach their 55th birthday just after the cut off, sometime in 2028.
“It’s now imperative that both Government and industry make sure this change is clear to all those saving in pensions. We can’t afford a repeat of the Government communication gaps which left many women to find out too late that their state pension age was increasing from 60 to 65.”