What the change to minimum pension age means for clients

While not being one to shirk from a bit of complexity this will mean that we will have protected pension ages for those under age 50, certain people between 50 and 55 and now those between 55 and 57. Presumably we will have a further increase to 58 in the future to contend with too.

Changing advice requirements

While a number of clients will continue to cash in their whole pot at once when they reach 57, there is still a considerable cohort who do not do so, and this change has the potential to derail their retirement plans.

There will also be a small number of people still preparing to retire earlier than 57 too and they will need to be prepared to bridge that gap before pension savings can be accessed. 

There are also other considerations to take into account. For example, if the client planned to take the 25 per cent tax free lump sum at age 55 and was this going towards any mortgage or debt repayments.

If so, then you will need to assist them in finding other ways to fund this or to talk with lenders to ensure they are not caught out. 

But with upheaval also comes opportunities, and a perfect chance for an adviser to show the value they can add to a client.

This change gives an extra two years to track down old pensions or consolidate to more efficient arrangements, provided it is of course in the client’s best interest.

As a result, it is crucial to use the extra time wisely as it may also be an excellent opportunity to get clients more engaged in their retirement planning and get them thinking about longevity when they might not have done so previously.

Nuances to beware

As described above there are nuances to watch out for as clients could easily become affected.

Retaining the protected age of 55 on transfer has the potential to create odd behaviours and will be a difficult balancing act for advisers trying to work out if the benefits of having a protected retirement age outweigh the potential downsides of being a member of said scheme.

While a number of clients will continue to cash in their whole pot at once when they reach 57, there is still a considerable cohort who do not do so, and this change has the potential to derail their retirement plans.

Furthermore, it is proposed that pension schemes can transition to the new normal minimum pension age earlier than 2028 if they wish although for the overall majority they will introduce this at the latest point possible.