On the go: Wealth manager Quilter has called on the government to reverse proposals to raise the normal minimum pension age to 57, saying the move is complex and will do little for people’s retirements.
Jon Greer, head of retirement policy at Quilter, said that while he appreciated the theory behind the decision, he believes the change has been poorly considered, with limited evidence that it would alter behaviour.
In February, HM Treasury announced that it plans to increase the normal minimum pension age from 55 to 57, effective from April 2028.
In its consultation document, the government stated that it “believes that increasing the minimum pension age reflects increases in longevity and changing expectations of how long people will remain in work and in retirement”.
According to Greer, data suggest that many people “cash in their pot at the earliest possible opportunity”, so raising the age by two years would do little to help their retirement.
He said: “According to the latest retirement income data from the Financial Conduct Authority, 55 per cent of pension plans accessed for the first time are withdrawn fully overall, with 75 per cent of those withdrawals done by people aged 55-64.
"Giving them an extra two years of saving isn’t going to change behaviour and will do very little for their prosperity.
“If you are worried about the longevity of people’s pension pots and people accessing their savings too early, you would not move the normal minimum pension age to 57.”
The Treasury is also proposing that existing scheme members retain their right to access their pensions at 55, while those who become members of schemes after the date of the consultation will be subject to the updated rules.
Greer believes there are two alternatives the government should consider in place of its current approach: either keep the normal minimum pension age at 55, or remove proposed transitional protections and move everyone to 57.
“A number of schemes would breathe a sigh of relief” should the normal minimum pension age be held at 55, he said.
“It would also prevent the unnecessary further complication of pensions — an industry that already suffers at the hands of difficult-to-understand rules and legislation.”
Greer added that it would “arguably be better” to move everyone to 57 and do away with any proposed transitional protections, should the government be intent on upping the age.
“This will make the change easier to understand and limit the unintended consequences, although thorough communication will be required for those it has the biggest direct impact on,” he said.
This article originally appeared on ftadviser.com
