Think-tank calls for private pension age to increase

Think-tank calls for private pension age to increase

Pensions analyst Michael Johnson has called for an increase in the age at which people can access their tax-free lump sum as part of a series of reforms he would like to see over the next five years.

Mr Johnson, a research fellow at the Centre for Policy Studies think-tank, said it should be raised from 55 to 60 by 2024.

The age from which savers can take out their tax-free lump sum is already scheduled to rise to 57 by 2028 but Mr Johnson has suggested a quicker rise, and he recommended increasing it to 65 by 2035.

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Mr Johnson said: “Such a move would focus minds on longer working lives, commensurate with the significant rise in life expectancy over recent decades.”

However, Claire Trott, head of technical at Sipp provider Talbot and Muir, said she disagreed with increasing the private pension age.

She said: “Increasing the private pension age will not build trust between the industry and consumers, which is such a major barrier to long-term saving within a pension.

“By rapidly increasing the age at which benefits can be taken it will undermine the work done to date to give access and freedom to consumers, again showing the government’s distrust in the ability of people to make the correct decisions for themselves.”

Martin Tilley, director of technical services at Dentons Pension Management, said: “I see no reason for increasing the private pension age.

“Just because you can, does not mean you should. People should have the choice to make their own decisions rather than have the state dictate to them when and what they can do.

“This is taking away from the recently introduced freedoms that have largely been welcomed.”

Key Points

Depending on the rules in any particular scheme, 55 is usually the earliest age a saver can take their personal or stakeholder pension.

Since April’s reforms it is also the age when savers can begin taking cash lump sums out of their pot.

The state pension age is currently 65 for men and 62 for women.

From December 2018 it will start rising meaning those born in the early 1980s will not reach it until they are 70.

Adviser view

Steven Robinson, managing director of Bristol-based Clarke Robinson, said: “We will have to see what the results of the pension freedoms are.

“If people start doing silly things like taking all their money out at 55, then putting it up might be a good thing.”