Age Increase for Access to Private Pensions

Photo by Ena Marinkovic from Pexels

Dreaming of lazy days relaxing with a nice cup of tea or coffee pondering what useful contribution you will make that day?

Well, you may have to put that thought on hold, at least for another couple of years, thanks to the government.

From 2028, the minimum age at which those with a private pension can access their funds will rise by two years from 55 to 57. This was originally announced back in 2014 but the legislation was not amended to include provision for implementing the change.

On the 28th August, Labour MP Stephen Timms tabled the question asking the Chancellor of the Exchequer what plans he has to increase the minimum age at which people can access their private pensions.

John Glen (pictured right), Secretary to the Treasury, responded with the following statement on the 3rd September.

“In 2014 the government announced it would increase the minimum pension age to 57 from 2028, reflecting trends in longevity and encouraging individuals to remain in work, while also helping to ensure pension savings provide for later life.”[1]

This change will affect those in their mid-forties or younger with any future plans of retiring early at 55 or drawing down to supplement their salary will have to wait a further two years. This may not sound terrible, but it does demonstrate that the government are willing to poke their finger into the personal finance pie.

There is no saying whether the government will return to private pensions in the future making additional changes to the age at which we can access our pension.

In my opinion, if I choose to invest money in a private finance vehicle then it should be up to me when I access it, in accordance with the investment criteria that is. Private pensions and investments should provide individuals with options on how they spend their years whether that be working or pursuing other interests.

Mr Glen suggests that the change will encourage “individuals to remain in work” – well, what if individuals do not want to remain in work? If we have worked hard and invested wisely, it should be our decision to make. Some may be happy to stay in work and that’s fine, nothing wrong with that at all, but others there may be something else they want to try out to increase their happiness and wellbeing.

Despite my feelings on this I will continue to contribute to my private pension, I still feel like it is the right thing for me to do at this time, plus it would be silly of me to not take advantage of my company matched contribution too.

I will, however, be reviewing my numbers and adjusting accordingly to accommodate this change. I expect it will mean that I will need to depend on a higher level of income from my ISAs for those two years if I am at the point of Financial Independence by the time I reach 55.


How do you feel about this change?

Will it affect your plans for financial independence or early retirement, and how will you mitigate the change?


References

1. Glen, J. (03/09/2020). Pensions – Question for Treasury. Retrieved from https://questions-statements.parliament.uk/written-questions/detail/2020-08-28/81494 on 13/09/2020.

June 2020 update

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Some good news on the work front this month, my team were told we would be returning to 100% hours from July – yay!

By Skitterphoto on pexels.com

The entire workforce was put onto 80% time/salary at the start of May as a precautionary step to protect the financial wellbeing of the company. I was initially worried about the financial impact this reduction in hours would bring but we have coped fine thankfully, my wife picked up extra shifts so it lessened the blow a bit.

How did I perform financially? I’ve put together a few figures to try and establish some benchmarks for future months, there may be a bit more detail for some areas than others at the moment but I’m working on that.

Spending

This covers our expenses such as groceries, travel costs, pets, and any other discretionary spending for the month. Not sure how this would compare to other families of four but it is the lowest for amoutn spent in a month this year – not sure if that’s because we have been doing less or if I’ve messed up the tracking somewhere!

Travel costs are really low at the moment as my wife is cycling to work, I’m still working from home, and we have declared our car off road with the DVLA.

I anticipate a much improved accuracy for spending in July as I have taken up the use of an app called “Emma” which utilises the open banking here in the UK to amalgamate transactions and balances across mutliple accounts. More on this app in another post, but it you’d like to take a look and sign-up in the mean time, please use my link* as I earn in-app points 🙂

Credit Card

I was a little hesitant in adding this category as I feel a degree of shame about getting into credit card debt. In fact, I have carried around this type of debt since my twenties, occasionally paying off the balance in full only to build it back up again. But, as Vicki Robin says, “No shame, no blame”!

Decided to use some extra money we had to pay down the debt a bit more aggressively this month than we usually would. Feels good to see that number come down and also get the balance below 25% of my credit limit.

Having been listening to the ChooseFI podcast for a little while now, the idea of using travel reward credit cards has grown on me but I still harbour a “fear” of the cards and the trouble they can cause without sufficient will power.

Company Pension

I use salary sacrifice to make the most of my income, this reduces the amount of income tax I have to pay as my salary is effectively reduced. My company offer a 3% contribution match which I take advantage of plus I add a decent percentage on top of that.

The scheme is run by Scottish Widows and typically does okay but the 2019/2020 year ended in a negative performance percentage. This resulted in my pension pot losing a few hundred pounds despite the contributions.

Emergency Fund

Contributions to my EF were low this month, mainly because I forgot to add the money 😦

Note to self: automate this to avoid the same happening again!

Pretty much all the podcasts and books talk about setting up an EF to cover three to six months of expenses, this feels pretty daunting when starting out. My first target is to cover one month’s worth, then I’ll aim for two months. I feel much more inclined to keep going when the goals are achievable, they don’t have to be easier but achievable none the less.

ISA, Freetrade

I opened my Freetrade ISA in May and added a further £310 to it during June. The cash balance was invested in funds according to my portfolio strategy which I’ll talk about in another post. I don’t have a magic link for Freetrade but if you are interested in opening an account (in the UK) then message me and I’ll send one through, we’ll both then earn a free share worth between £3 and £200 – nice!

That pretty much rounds out my thoughts on my June finances, a bit late in getting these written down and published but heh-ho 😀 Next month, I intend to get round to this a bit earlier and making small incrementally improvements to my systems should enable this.


Quick question for you, do you use reward credit cards? If so, what have they enabled you to do, what places have you visited courtesy of using these cards rather than using a debit card?


Thanks for making it this far! Let me know what your thoughts are on financial updates and the kinds of things you measure.

Have a great week 🙂

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