There is the possibility that some pensioners could find it impossible to release their pension benefits when the Government changes the minimum pension age from 50 to 55 in 2010, according to Hornbuckle Mitchell.
They say that people who are considering retiring early at age 50 or those already taking their pension benefits through a phased retirement arrangement (as opposed to a pension annuity) need to take action to ensure that their plans for retirement plans are not affected by the change. Customers using phased retirement, which involves splitting the pension fund into segments, who turn 55 after April 2010 could end up facing additional charges.
They add that any pension income from vested segments from a phased retirement arrangement can continue to be paid. But no new drawdown will be allowed from unvested segments until the retiree reaches age 55 or unauthorised payments charges will apply. To avoid these charges customers should consider unlocking other segments early or risk being locked out of access to their pension income until they reach age 55.
At the moment anyone aged 50 or more can take tax-free cash from their pension, but on April 6 2010, the age limit will rise to 55, and this could impact on someone who had run a pension mortgage, planning to use the tax-free cash to pay it off in their early to mid-50s, for example.
The message is clear; if you are likely to be affected by the rise in pension age to age 55 you should ensure you take steps and don’t end up with large liabilities and no way to pay for them when you reach 50.
