Personal finance expert Martin Lewis says ‘Please don’t read this as a call to rush money out while you can’ ahead of the private pension access age rising
Martin Lewis has highlighted a crucial date for anyone holding a private pension – while emphasising ‘Please don’t read this as a call to rush money out while you can.’
During an appearance on ITV’s This Morning, the money-saving expert provided a ‘rough guide to the changes’.
The matter concerns alterations to the UK state pension age. Currently, the state pension age sits at 66 for both men and women, with plans to increase it to 67 between April 2026 and March 2028.
This development is also affecting when individuals can withdraw lump sums from their private pensions.
Mr Lewis explained: “I was asked today on This Morning… with the age you can normally take money out of a private pension rising from 55 to 57 on 6 April 2028, what happens to people who take money out at 55 or 56 in the year before the age rises?”
“The rough general rule is: if by 6 April 2028, you’ve already taken steps to access that bit of your pension eg designated money into drawdown, bought an annuity, those payments should be able to continue after the age rises, even if you’re still only 55 or 56.
“But other uncrystallised pension money you haven’t dealt with by 6 April 2028, will usually need to wait until age 57 to access that part.
“Pls don’t read this as a call to rush money out while you can. Often, leaving money in a pension for longer, so it can keep growing may be the better move. Most important though, there are many other different elements to this and special rules for certain products so before taking pension money for the first time, always get free guidance from MoneyHelper Pension Wise service.”
Martin also revealed he’d had a bit of a shock about it: “It dawned on me I’m in this category, as I’ll be 55 in May 2027. I can’t quite get it through my head that I’ll be old enough to take pension money out next year. When the hell did that happen!!! See less”
Martin Lewis has offered his perspective on building savings and investments for your retirement and later years.
Recently on BBC Morning Live, personal finance expert Laura Pomfret revealed that savers are taking action now before new regulations take effect. Ms Pomfret explained this was also affecting the ages at which individuals could access lump sums from their pensions. She said research from the Pensions Commission published recently showed one “thing that we thought was interesting was it showed that pension pots are being accessed at the earliest opportunity. So almost a third of people are accessing their pension pots at the earliest opportunity. This is again private pensions and perhaps you may be doing it because you’ve got debts you want to pay. You might want to pay off your mortgage. You might want to help family out.
“There’s lots of reasons why people do want to access their pension money early. Now but taking money early can have a knock-on effect if you think if you’re taking a chunk or even a small amount out of the pot less. It’s got less money in it to grow and it may leave you with not enough when you reach retirement because the current state pension age is 66.”
She continued: “This is going to increase in stages over the next two years to 67 and the earliest age that you can access your private pension is currently 55. It will be rising to 57 from April 28. So, this does cause concern because if you’re accessing your pension early, it could leave you short later. If someone no longer wants to work and access that pension early, they’ve got to work out how to bridge the gap until they reach state pension age.”
She noted that the report additionally revealed that individuals were failing to set aside sufficient funds for their retirement, with those on low and middle incomes facing the greatest risk. She said: “It also found that just under half of working age adults are not saving into a private pension at all. That’s around 18 million people and times are tough right now and so we can imagine why people may be choosing to do that or you through no fault of their own.”
“Only 4% of self-employed workers are saving into a pension. That’s one in 25 people. So that was also something that came out of the report.” Regarding whether individuals are putting away sufficient funds, she emphasised the importance of reflecting on one’s retirement aspirations.
She advised that people ought to take into account ongoing expenditure, regular outgoings, and their travel ambitions. She also raised the question of dining out habits, current spending patterns, and housing costs such as mortgages and rent during retirement.
