The government’s focus on encouraging sustained savings for retirement
Retirement planning is an ongoing process that requires adapting to changes in rules and regulations. One such shift is set to occur from 6 April 2028, when the normal minimum pension age (NMPA), which is the earliest age you can access your pension savings without penalties, will increase from 55 to 57. This adjustment reflects longer life expectancies and the government’s focus on encouraging sustained savings for retirement.
This upcoming change may still seem distant, but now is the time to assess how it could affect your financial plans. Whether you’re just starting your retirement planning or are approaching the age when you wish to access your funds, it’s crucial to comprehend what this entails and how you can adapt your plans to remain on course.
Who will be affected by the NMPA change?
The increase to NMPA will directly affect anyone born after 5 April 1973. These individuals will need to wait until age 57 to access their pension savings, except in specific cases such as serious ill health or where a protected pension age applies.
For those born between 6 April 1971 and 5 April 1973, there is a unique window of opportunity. If your 55th birthday falls before 6 April 2028, you will still be able to access your pension within this transitional period. However, this window closes with the implementation of the new rules, making it critical for those in this group to evaluate how and when they plan to use their pension savings.
If you were born on or before 5 April 1971, there’s no need for concern. You’ll already have turned 57 before the rule change takes effect, meaning your retirement plans won’t be influenced by this adjustment.
Impact on your retirement planning timeline
If your plans involve drawing from your pension pot at 55, the NMPA change means you’ll need to reassess your strategy. The additional two years without access to these funds could mean focusing more on saving through other means, such as ISAs or taxable accounts, to cover the gap in your finances.
Alternatively, if you weren’t planning to access your pension savings before 57, this change shouldn’t disrupt your current strategy. That said, a regular review of your retirement plans is always a good practice to ensure they align with your goals and the latest regulations.
Navigating the 55 to 57 opportunity
For those able to access their pension savings before the NMPA increase, careful consideration is needed. Drawing on your pension early can provide immediate financial freedom for big expenses, such as holidays, home renovations, or helping children onto the property ladder. However, early withdrawals also mean less time for your funds to grow, which could reduce your long-term retirement income.
Furthermore, taking taxable income from your pension can activate the money purchase annual allowance (MPAA), which limits your future pension contributions to just £10,000 per year. This restriction could impact your ability to continue building your pension pot effectively, so it’s worth seeking professional advice before making any early withdrawals.
The importance of reviewing your retirement date
Your retirement date plays a critical role in your pension plan, especially if your investments follow a lifestyle investment strategy. This approach gradually transitions your savings into lower-risk assets as you approach your planned retirement age, reducing exposure to market volatility.
However, if your retirement date is set for an age you can no longer access your pension (such as 55 after 2028), there’s a potential mismatch that could jeopardise your savings.
Low-risk investments may limit potential growth if they are transitioned prematurely. Conversely, keeping funds in high-risk investments could expose your pension pot to unnecessary risks if you plan to retire earlier than anticipated.
These scenarios highlight the importance of setting a realistic retirement date and revisiting it as your circumstances evolve.
Practical steps to prepare for 2028
Proactively adjusting to the NMPA increase starts with a review of your financial plan. Check your current retirement age and assess how the new rules will impact your access to pension savings. Next, consider alternative savings strategies if you anticipate needing funds before age 57. ISAs, for example, are a flexible and tax-efficient option worth exploring.
Ensure you understand the terms for qualifying for a protected pension age under certain schemes. Making unintended changes to these pensions could result in losing valuable rights to access your savings early. You might also consider deferring your retirement ambitions or contributing more to accessible financial products.
For those with pensions already in place, reviewing your investment strategy to optimise performance and minimise risks remains a key focus. Obtaining professional financial advice will clarify how these adjustments fit your unique circumstances.
Take charge of your retirement goals
The increase in the normal minimum pension age doesn’t have to disrupt your retirement plans, but taking steps to prepare now ensures you’re well-positioned to adapt. By evaluating your timeline, reviewing your savings strategy, and aligning your investments
with your actual retirement goals, you can minimise the impact of these changes on your future financial security.
