The Pension Age Change – Your Options

The minimum retirement age increases from 50 to 55 on 6th April 2010 and you maybe directly affected by this change.

At the moment it’s possible to use your pension to provide a tax-free lump sum and/or an income at any time after you reach the current minimum retirement age of 50.  You don’t even need to stop working to do this.

However, if you are over 50, or will be by 5th April 2010 - and you do not access your pension benefits by then - you will not be able to take any money out of your pension fund until you are 55.  This means that if you wish to take any pension benefits before your 55th birthday, it is important that you take financial advice now so that you can make the necessary plans before the 5th April 2010.

If you did wish to take your pension before age 55 there are two options:
  • you could choose to buy an annuity, a financial product that would provide you with a tax-free lump sum of 25% of your fund plus a regular income for life.  
  • Alternatively, if you are not ready to swap your pension fund for a guaranteed income just yet, you may be able to utilise ‘income drawdown’.  An income drawdown plan is a much more flexible option with the ability to draw your tax free cash and leave the residual fund to benefit from future investment growth or to specify what income you would like to draw (within the minimum and maximum limits).
If you think that you might need to take benefits from your pension fund before your 55th birthday, please contact me so that we can consider your options and the impact this will have on your income later in retirement, when the possibility of earning is no longer an option.

Please contact Jonathan Hearn at Montpelier on 01675 446500 should you wish to discuss your scenario in further detail.