The increased minimum retirement age change due imminently could delay pension and pension annuity benefits for some people. The government decision to change the minimum retirement age from 50 to 55 as of April next year 2010 could delay pension benefits for some people and should be mirrored by a higher age for having to buy an annuity by, say experts.
David Trenner, the technical director at Intelligent Pensions, said the changes to the minimum retirement age made in 2004 as part of overall pension simplification come into effect next year. Commenting that most of us cannot afford to retire at 50 anyway but for those who can this change is really unwelcome and inconsistent. If the fact that people are living longer in retirement is a reason to increase the minimum age for drawing pension benefits, then why does it not also result in a higher age other than 75 by which a pension annuity must be purchased?
He actually recommends that people in their early 50’s, but under 55-years-old put part of their pension plan into payment but draw a nil income in order to keep their options open to them after April 2010. After all, if you are just 50 now, the new pension rules will make you have to wait four years to access your pension benefits if you do not do something soon.
He added that people in their early fifties who are already in a phased retirement arrangement that have not yet taken their tax free cash should think about doing so before April. They will be able to take their tax free cash this year but not the next year, when they will only be able to access their drawdown income. It will change a lot of peoples’ arrangements as the tax free money is used for a lot of things.
Mind you, retiring at age 50 or thereabouts is not really a sensible thing to do, even if you can afford it, as the annuity rates on offer to those of a younger age are pretty poor.