top of page
  • Paul Clifton

When will you be able to access your pension? It might be later than you think!

Updated: Sep 7, 2020

What is the state pension age?

See blog of September 2020 regarding the new age 57 minimum private retirement.

Do you know when you will be able to start drawing your State Pension?

Apparently, 52% of non-retired adults are unsure and 55% don’t know how much the weekly State Pension is. Are you one of those people? Are you aware of the age changes when you can access your private pension too?

This lack of knowledge is even worse among younger people as, 18-24-year-olds:

  • 93% do not know how much the State Pension is

  • 83% don’t know their State Pension Age.

Currently, the earliest you can access your State Pension is age 65 and your private pension from age 55. It was not that many years ago that you were able to take your private pension from age 50. The age that you can take your private pension is set to change in the future and will affect millions of people. For some people, it is already set to increase to 57 and possibly 58 for young people. With so much riding on your income in retirement, it is vital that you start planning as early as possible.

When the State Pension was introduced in 1948, a 65-year-old could expect to live and draw their State Pension for another 14 years i.e. around 23% of their adult life. Now, a 65-year-old can expect to live for another 23 years, i.e. 34% of their adult life. Due to the increasing cost of financing pensions, the government is steadily increased the State Pension Age.

How much State Pension are you entitled to?

You can use the website to find out how much State Pension you are entitled to. To access the page, click here. You will need to have your Government Gateway details ready, if you have used any online government services before. However, if you haven’t you can set up a new account.

You can also use the Government Gateway to find out how many qualifying years of National Insurance contributions you have paid. You need to have contributed for 35 years to get the full State Pension.

The new maximum flat rate State Pension is £159.55 per week (£8,297 pa). However, this only applies if you have accumulated the full 35 qualifying years. So that means that you accrue £4.56 per week (£237.12 pa) in State Pension for each qualifying year. You must however accrue at least 10 qualifying years to receive any State Pension.

If you accrued qualifying years towards your State Pension before April 2016 then you have more complicated pension arrangements. Before that date you only had to accrue 30 qualifying years for a full State Pension. You would also receive an earnings related top-up to your basic State Pension. This was known as SERPS (State Earnings Related Pension Scheme) or S2P (State Second Pension). Under the new flat rate pension, higher earners will receive less pension income. However, those on lower earnings will receive a higher, non-earnings related, flat rate pension.

You do not always have to have a job and pay National Insurance to accrue qualifying years. People in full-time education, on sickness and maternity benefit and those bringing up children can accrue benefits. Also, if you are an employee or director of a company and currently earn between £113 per week (£5,876 pa) and £157 per week (£8,164 pa) then you accrue a qualifying year but you do not actually pay any National Insurance. Employees and directors who earn over £157 per week pay National Insurance on their income above that amount. The rules for the self-employed are different and are due to change in the very near future.

What is your State Pension Age?

You can find out your exact State Pension Age by clicking here. The closer you currently are to retirement, the earlier your State Pension Age will be. The State Pension Age has now moved to 65 for men and women. It will then increase to 66 and later to 67 over the next decade as follows.

  • 66 between 2019 and 2020

  • 67 between 2026 and 2028

Under the current law, the State Pension Age is set to increase again to 68 between 2044 and 2046. Following a recent review, the government has announced plans to bring this timetable forward. The State Pension Age would then increase to 68 for people reaching that age between 2037 and 2039. This change would affect people born between 6 April 1970 and 5 April 1978.

Pension freedoms

Pension freedoms have been around for nearly three years. In that time, they have revolutionised pensions, providing choice and flexibility to those approaching retirement. Instead of being forced to hand over your private pension pot in return for a fixed [currently relatively low] annuity for the rest of your natural life, you have the freedom to draw your pension how you want. That may be by way of a large one off lump sum, regular or irregular lump sums or a regular income from your pension pot with the ability to vary it year on year, if you decide.

When can I access my private pension?

However, amid the growing awareness of Pension Freedoms, a new rule has gone largely unnoticed by many people.

Currently, the earliest that you can access your pension pot through Pension Freedoms is age 55, unless you have severely ill-health. This age is set to change in the future, following a change in legislation that would put the earliest you can access your pension pot at 10 years below the State Pension Age. This will increase the age at which you will be able to access your private pension pot, first to 56, then to 57 and subject to further legislation to age 58.

This will, of course, affect millions of people, delaying their retirement and resulting in them working longer than they perhaps would have wanted to.

When you can take your private pension depends entirely on your date of birth.

Due to the fact that, as a whole, we are all living longer, the State Pension Age is increasing. We are now all drawing out our pensions for longer periods of time. As a result, sustainable measures have been put into place.

Whilst being forced to delay taking your private pension by a year or two may not sound like a long time, it could have a significant impact on the retirement plans of people who intend to access their pension at the age of 55.

There are essentially two options that these affected people will have:

  • Delay their retirement until they can access their pension pot

  • Continue and retire, but do without their private pension, choosing instead to bridge the gap with other sources of income such as investments or savings.

An independent financial adviser will be your best sources of advice when planning for retirement.

48 views0 comments

Recent Posts

See All
bottom of page