The Association of British Insurers has called on the government to increase the pension freedoms age from 55 to 57, as part of several safeguards to protect consumers.
Speaking at a conference last week in London, Yvonne Braun, ABI’s director of long-term savings policy, noted the age change had been part of the government’s original plan in 2015 when the new pension flexibility rules were introduced, but has not been legislated for.
She also called for a new pension review at age 75, which would examine retirement options from then on.
She said: "The minimum pension age should be increased from 55 to 57 over the near term. This was already part of the government’s original plan in 2015, but has not been legislated for.
“Government should then review the minimum age regularly."
Introduced by former chancellor of the exchequer George Osborne in April 2015 the pension freedom rules opened up the way savers can access their pension cash, allowing them unfettered access from the age of 55.
This lead to a hike in drawdown sales in lieu of annuities as well as an increase in transfers out of so-called 'gold-plated' retirement plans as people sought to get immediate access to their cash.
However, while the state pension age has been rising to reach 66 by October 2020, and 67 between 2026 and 2028, the age at which savers can access their pensions remained unchanged at 55.
Ms Braun said this was one of four safeguards the government should introduce in this area, after several risks were identified by the ABI, “especially around unsustainable withdrawal rates in non-advised drawdown; the large number of withdrawals as single lump sums, particularly at early ages; and customer vulnerability, particularly in later life”.
She noted that recent data showed a trend towards people taking larger proportions of their pot through regular withdrawals after 44 per cent of customers took more than 8 per cent per year in the year to March 2019.
She said: “At the same time, a growing number are unadvised. Other evidence shows consumers are making complex choices in drawdown without fully understanding how it works.
“Freedom and choice has also led to a surge of transfers from defined benefit to defined contribution schemes which has exposed huge flaws in the advice market.”
Due to this, the ABI is proposing that a later life review of retirement options should be introduced at age 75.
Ms Braun noted that “providers should be enabled to provide more help to customers without giving advice”, and that “employers should be required to give standard information about their DB pension scheme before someone is able to transfer out”.
She added the ABI would work on the details of the proposals, which will be published next year.
Paul Gibson, managing director at Granite Financial Planning, doesn't agree that increasing the pension freedoms age by two years will have any significant benefit.
He said: "If you run out of money at age 66 instead of 64 is this really a positive outcome?