Moving the goal post again – pension age increasing to 57!
September 3, 2020
The government has confirmed that the minimum pension age is increasing from 55 to 57 in 2028 and we suspect there will be further increases. This can be seen as both good and bad news, but for us, we mainly see this as bad news for those without a financial plan. Those currently 48 or over are safe from this change. Pensions can be an extremely powerful shelter for your wealth but only if the circumstances are right. To be fair, the government doesn’t always amend pension legislation negatively, for example, a change in April this year has improved the annual allowance limit for high earners. This change has little effect for those under 30, as it is unlikely that they would have accumulated a big pension pot. But for those in their early 40’s, who have based their retirement plan on a target retirement age of 55 would be particularly impacted. There will be no transitional rules that protects existing pension assets already saved.
Flexibility is the key when building your financial plan as it allows you to take advantage of the various planning opportunities available. Just like the benefits of liquidity in an investment portfolio (see our earlier blog post https://www.ironwealth.co.uk/liquidity-an-important-consideration-of-portfolio-management )
Nothing is static, so your financial plan should be flexible enough to cope with the changes that are still unknown. It should evolve with legislative changes, as well as changes in your circumstance. Diversification is not just an important strategy for investments, it also makes sense when it comes to tax planning. Using too few solutions for both income/capital and estate planning can cost you greatly. This is a very timely reminder that retirement/investment planning should not always consist of just one pot, just because it is the widely adopted way. Having multiple pots to draw on, each with its own tax treatment, gives you far greater scope to optimise tax efficiency and accessibility.
If you would like to understand more about how we adopt a multiple pot approach, or how your current financial plan measures up in terms of flexibility, we would be more than happy to help.
Risk Warnings:
The information contained in this article is intended solely for information purposes only and does not constitute advice. The price of investments and the income derived from them can go down as well as up, and investors may not get back the amount they invested. Past performance is not necessarily a guide to future performance.
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